Hi guys:
Would love to hear your thoughts and impressions on this - are large cap PE funds all large bureaucracies at this point? Do "corporate type" people (smart enough to execute but not so smart they provide real insights, good at singing the corporate songs, etc.) fill up its ranks/find it easier to succeed there? Thanks!
I spent a summer at Cerberus on a pretty small team before working at the MM PE firm I'm currently at. Despite being an intern at the time, I was able to get a good amount of face time with everyone on my ~20 person team.
There aren't many "Corporate Types" but there are a hell of a lot of "Traditional PE Types." It became apparent very quickly that there's a large group of employees that followed the same path: Exeter -> Harvard -> Evercore/Goldman -> MF PE -> Columbia Business School (for the NYC lifestyle ofc) -> Cerberus.
It was very hard to tell what these guys brought to the table sometimes. Even when it was obvious, I wasn't all that impressed... Some of the guys with connections to truly powerful people were really just calling on their friends from high school in many instances. Some of the maneuvers I saw were truly eye opening.
Mind elaborating on what you saw?
Are you being sarcastic about the Columbia Business School point? I would be really surprised if a EVR/GS -> MF PE person ended up at Columbia / would be ok ending up at Columbia so interested if I need to reassess my perceptions.
Yes, sarcasm. IMO it is crazy that a Columbia MBA is considered a "back-up option" in some circles.
A lot of large cap PE firms are buying heavily shopped processes. A big portion of PE returns come from leverage and access, not some stroke of investment genius.
Interesting insights; given that a large portion of large cap return comes from having access, do you think that is sustainable? What might disrupt it?
Access is priceless. Proprietary deal sourcing channels / access (to exclusive or invite-only processes) will rise in value going forward assuming access across the board (continues to) increases. As access increases, deals get more competitive and multiples go up. Said another way - as the world gets more connected and the price to launch capital calls decreases, it gets a lot harder to find great businesses at great multiples because everyone is competing for the same number of deals. Which process is more competitive - one in 1990 where the bankers sent out 100 page decks in the mail / visited data rooms physically or in 2019 where PDFs go out in batches of 100 and VDRs can provide instant access to diligence materials.
For example, Cerberus was on the short list of ~5 firms (guessing) that were asked to bid on some energy assets. Whoever ran the process reached out to us because he trusted a Partner at the firm to keep everything quiet and move quickly. IIRC the issue was that the owners were politically connected and the asset provided a lot of jobs to a lot of people... but they needed some liquidity without losing face publicly.
Actually they're more like restaurants - serving everyone the same crap with little differentiation
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