This mainly applies to those who did’t do PE prior to an MBA. What if someone breaks into IB at 25, does 2 years, and then goes to HSW. Why is it that a PE firm wouldn’t take that person as an associate, but they would offer a 22 year old right out of college an associate role after the 2 year IB stint?
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Prepping for truckloads of monkey shit here, but the truth is that the work you do as a PE associate is not only more difficult but comes with far more responsibility. You don’t get to “massage” numbers in PE, you need to explain them. Your investment committee will laugh you out of the conference room is you can’t back up your assumptions. I could go on and on. A few years of additional education certainly does not prepare you to be a PE associate. Transaction experience, modelling experience (not talking about comps here), time spent with management/CFOs, etc. does. My two cents after jumping from less than two years of M&A ad an analyst to PE associate at a MM PE fund (~$5-10B AUM).
This question is very much top of mind for me as someone who went target school->solid job->starting MBA business schools">M7 in the fall. Only discovered what IB and PE even are maybe 2 years ago and since then struggled with whether to get my MBA now or totally reset as a 25/26 year old analyst. Chose to MBA route but have learned I'm essentially blocked out of any career in PE now feasibly.
I totally get why it's the norm to only take post-MBA senior associates/VPs in PE if you have prior experience in the industry. It's just very frustrating for me as someone who now knows this is my greatest career interest to have no prayer at the industry when I'm still only 25 years old and feel I'm more than capable of doing the job well.
How did you go to a target and not know what IB was
A bit of ignorance on my part but I was recruiting for consulting, strategy, and some AM while paying very little attention to IB. I applied to a few roles in IB with literally zero networking or added effort not realizing how the process went, and even assumed it was the same thing as AM based off the name ("investment" in the name). Foolish on my part as an econ major but kind of saw the guys going into IB as the popular, fratty bros and never thought it could be a path for me no matter what the nature of the job was. As I began working with IBs advising us over the last two years and talked to friends who did IB->PE, I realized way too late it's something that genuinely interests me a ton.
FWIW I'd say over half the people from my school who even do consulting or corp finance (let alone medicine, law, tech, or academia) wouldn't be able to articulate to you exactly what IB is (and even fewer what PE is) or how the whole IB to PE process works, so I'm not alone.
calm down, buddy. if you go IB out of b school (esp an m7), you'll be able to recruit for PE later on. i've seen it done a handful of times. they're obviously going to prefer other paths, but it's not like the avenue is closed to you.
You're not wrong but when I look at people who have gone top MBA->IB there are only a couple of success stories across hundreds of people (more actually who have gone consulting to PE). I talked to only one person from my future school who did it successfully and it was GS IB to one of their PE groups and he confirmed it's not impossible but an incredible uphill battle and luck of the draw for him.
Not trying to overreact or oversimplify but compared to pre-MBA IB, it's night and day--not impossible, but unstructured and incredibly challenging.
I'm not upset at all for not being able to go directly into it, simply meant there's much less of a clear path for people who discover it late and are going to an MBA partially to pivot towards the industry. I have no expectation (nor would I think it's feasible) to jump directly into a PE role especially at the VP level, but out of undergrad it's a very clear step IB analyst->PE associate whereas nothing as clear exists at the post-MBA level for people who discover it late. Agree in LMM it's more possible to do post-MBA IB->PE but even funds above $5B or so have almost no examples of that, whereas that's obviously quite doable pre-MBA from many banks.
I'd be very comfortable going IB VP (after a few years there post-MBA) to PE associate/senior associate because I want to be in the industry a lot, but realize most people would be less comfortable with that.
Totally get the excess of talent and why it'll be challenging for me, it makes complete sense. In my apps I said I would do IB->PE which I realized over the app process/since then (post-submission) rarely happens and may have been dinged from places like H/W without interview when I had classmates and colleagues who got into those places with lesser GPA, GMAT, quality of work experiences--some schools saw right through it and thought it naive or unrealistic.
I agree the MBA will be an obstruction and looking back one year I would've done everything I could have to change roles rather than getting the MBA, which at the time I saw as an opp to do IB->PE and have a clearer path to break in. From 2 years ago to a few months ago, I did have some traction along 3 areas:
PE investing roles at family offices, pensions/endowments, FoF, secondaries, co-investments, etc. Some even made me offers but comp was less than stellar and in talking to people it might have been tough to go from there to a direct investing role ever
Roles at top PE shops ($15B+) in portfolio operations/value creation or more of "corporate strategy". Very attractive roles with comp in line with associates in investing and would have gotten me into HSW I believe with a more compelling story but still might have had a challenging time getting into an investing role even with top PE shop and HSW on my resume
Analyst-level IB roles. I was the most all-in on these spending a lot of time on technical/behavioral prep. Networked and worked with recruiters to get interview with firms like Lazard, CS, GHL, and Centerview over time. Botched a couple on technicals, had a great one that focused less on technicals and more on understanding of the role. Headhunter got back to me saying the principcal who interviewed me liked me a lot and I'd probably be moving on but never heard back. The last one was months later and I doubled down on technicals, but my interviewer spent the entire discussion drilling down on two technical instances on IS line iterms and valuation questions that did not reflect my ability to do the job. Recruiter got back to me that interviewer thought I was super smart but had technical aptitude below an SA which is ironic because I think modeling and numbers are my core strength. Long way of saying it didn't work out despite hundreds of hours put in so that route would've been a 3-year delay in my career coming in entry level but I tried (I think landing a post-MBA IB role is still very doable but less desirable).
People have touched on a bunch of points, all of which are true to some extent, but the main factor is that most PE firms (and most organizations generally) have a pyramid-shaped org structure with more VP/Principals than partners, and more Associates than VP/Principals. As you go up the ladder, the sheer volume of roles decreases.
As a result, the supply of VP jobs is fundamentally outstripped by the number of available PE Associates gunning for those jobs and as a result, most PE firms can easily fill their ranks selecting only from people who previously worked in PE. If you had the choice between someone with PE experience and someone without, why wouldn't you choose the former, all else equal? There are certainly some people who are able to break through without PE experience, mainly at smaller, less established funds that may not have the pick of the litter when hiring from the PE associate pool, but by and large VP roles are filled by former PE associates.
Banking is difference because so many analysts leave and don't return to banking that there is fundamentally a shortage at the Associate level. PE doesn't have this structural issue because voluntary attrition from PE is much lower than in banking.