Ask CompBanker

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At the request of Patrick and a few users, I have agreed to start an "Ask CompBanker" thread. The purpose is to share responses to my historical and future PMs with the community while keeping the question asker anonymous. Anyone is welcome to send me a PM or post below with a question and I'll respond in this thread.

For those who are new, below are some of my other explaining my background. I'll do my best to answer any question posed, but my background is in the middle market and I've worked exclusively on M&A and Leveraged Buyouts my whole career. I've also taken the GMAT and applied to b-school, though I didn't matriculate.


Note: Comments in this thread will be deleted after I've responded. I will attempt to answer follow-up questions by editing my original response. Please look back at the original response if you find your follow-up question deleted.

Comments (54)

Feb 21, 2012

I'm a 2nd-yr Analyst at a BB and have my 1st private equity interview this coming Tuesday with a MM PE. Just wanted to know what do you think are the most important characteristics that I should portray in this interview. I already know about the PE industry and know the basic technicals; having done banking for a while I'm not that worried about being asked specific valuation questions. I'm more concerned about the BIG PICTURE fit questions and qualities they are looking for.

I think overall, confidence is one of the most important things you can demonstrate in an interview, particularly in private equity. How you deliver your response is just as important as the actual response itself. If you are already comfortable with the technical questions then the most important thing you will need to focus on is being articulate and confident. This is the single most critical thing that will set you apart from your peers and what the senior guys tend to look for the most.

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Feb 21, 2012

Question, I'm looking at corp dev jobs now... I want to put a case study together to show I know modeling inside and out (i'm an analyst). I've already identified a potential target who isn't a client of my bank...But I don't want to put this M&A case study together to come off as a "pitch." Do you think I can get in trouble if I clearly state this is purely to showcase my skills and has nothing to do with my current full-time position?
My alternative would be to do a case study of a past transaction they completed in say, 09 and do it as of 08 or something, but I feel like it's kind of "cheating'' since all the information regarding that deal is already available..

Honestly, I'd be careful about putting together a case study on an industry that they know very well. If they start to grill you on it, you may come off looking foolish and uneducated on the subject. It can be really hard to impress someone in their area expertise so I'd stick to impressing them with your finance skillset rather than your industry knowledge. What I have seen someone do successfully is put together a case study for a totally unrelated business to prove to the employer that this particular person had talent. It was very well received and this person got the job despite being totally unqualified in every other aspect.

As for your MD, this is going to be tricky no matter how you look at it. Not much advice I can give you other than to try to lay low and have a good excuse ready in the event you do get caught.

    • 2
Feb 21, 2012

From what it seems like, life at MM funds outside of NYC seems to be a bit less stressful, where the average non-live-deal work week ranges between 50-60 hours. Is this correct, or am I just dreaming of a fairytale land?

Lifestyle outside of NYC is usually much better, however there are exceptions. In the PE world, the lifestyle is largely determined by the senior folks. If they are hardcore, you will be expected to be. If they value lifestyle, you'll have a much better balance. You likely won't know until you've started interviewing and start to get a feel for the team. From my experience, many of the MM firms in NYC are very intense and most of the MM firms outside of major financial cities are incredibly laid back.

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Feb 21, 2012

How do PE firms view analysts who stayed on for a third year rather than jumping to PE after year 2? Were I in these firms' shoes, I would assume that something was inherently wrong with the candidate who didn't land a job during his first process.

Honestly, I think you're making it a bigger concern than it is. At least a third of the applicants that we received at my last shop in the past 2 years were folks with 3 or more years of experience. We even had multiple people who were accepting associate promotions after being bankers for 3 full years (one of which we hired). Just be sure you have a compelling but honest answer as to why you stuck around a third year.

One thing to note is that by staying a third year, you were effectively setting your career back by a year. The folks who get hired with 3 years of banking experience get the same level of responsibility and the same pay as the folks with 2 years of banking experience. This isn't a problem at first, but if you continually stick around longer than usual, you'll find yourself falling behind your peers. For example: I manage a pre-MBA associate who graduated from undergrad the same year I did, simply because I took an expedited path while he spent three years banking.

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Feb 21, 2012

I've tried to get into Institutional Equity Sales in Atlanta and have done all of the following:
-networked on LinkedIn/other ways
-followed up with HR
-highlighted my prior Finance experience/FINRA licenses
-resume done by professional
-applied to every key Atlanta bank with S&T

What else should I do given the circumstances?

Given your situation (or anyone's really), there are really two fundamental ways that you can improve your chances. The first is through networking. Cold calls / emails, or anything else you can do to help build a network in your desired field is great. Even if they don't lead to immediate opportunities, building a lasting network can be crucial. It seems like you've already been doing this extensively, which is great. The second way you can improve your chances is by building your profile. This means things such as taking the CFA, bolstering your GPA (too late if you've graduated), keeping current on the news, learning your technicals inside and out, and other "resume building" activities.

The good news is that there is really no limit to the extent you can work on the two categories mentioned above, so your goal should be to dedicate as much time as possible to maximizing your chances through networking and self improvement. Note that it is also important that you achieve a balance between these two. If you spend a lot of time building your profile, you won't need to spend as much time networking. Similarly, if you've got a vast and dedicated network, you won't need as strong a profile. Balance is key.

That's pretty much the best advice I can give you. Unfortunately, there is no silver bullet to breaking into finance, and now is as tough as ever before. The trick is to keep at it, because you'll never break in if you give up.

For Institutional Sales, assuming that soon I can break into it, I've considered not going to business school for my MBA in the next few years. I know that you mentioned that an MBA can be valuable, but for Institutional Salesmen, I've seen that the vast majority of them don't have MBAs, so for me, my thinking is that it isn't as valuable and that I should just leave it alone in the future. What are your thoughts on the value of an MBA for an Institutional Salesman and also what are your thoughts on the Goizueta Business School at Emory for an MBA for Atlanta S&T?

Let me clarify that while I view the MBA as a valuable degree, it doesn't make sense for every career path. For someone that works in S&T, it is very uncommon to get an MBA as this is generally not viewed as a career enhancing degree. As such, I don't recommend you pursue it unless you have plans to leave institutional sales shortly after obtaining the MBA. As for Goizueta Business school, I don't know much about it because no one I've ever interacted with professional has obtained an MBA from there. That itself may be a telling statistic. However, people obtain MBAs for different reasons, and there are many reasons why an MBA from Goizueta could be a good career move for someone.

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Feb 21, 2012

In your experience, is competition for M&A/LevFIN as tough as WSO would make it see? It seems everyone on the boards is M&A oriented.

I'd say that competition for M&A tends to be higher than the other groups. The truth is M&A is known as the "sexy" portion of the business. Most college grads don't truly know the nuanced differences between each of the groups so it is easy for them to pursue M&A as a default. The only exception is people with connections to a particular group or those that know they have an interest in a particular industry vertical. Now -- the bank I worked at was strictly M&A so I don't have any personal experience in the matter, but this is my take from interacting with other professionals.

    • 1
Feb 21, 2012

Is that your picture in the corner?

Nope. It's Christian Bale from Equilibrium. Fantastic movie, I highly recommend it if you enjoyed reading 1984 or The Hunger Games.

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Feb 21, 2012

I was hoping you could answer any questions about healthcare IB. What is it like compared to other industries?Any specifics?

The biggest difference for me was trying to understand and stay up to date on the many regulatory rules that constantly change the healthcare landscape. Any changes in reimbursement for Medicaid or Medicare usually meant I was stuck doing research that my peers never needed to worry about. In an ever-changing environment such as healthcare, this creates substantial additional (boring) work over and above the typical analyst experience.

Who are the big players in healthcare IB/PE? Is there a lot of dealflow?

In the middle market, William Blair was constantly heralded as the leader in healthcare services deals. There are a bunch of niche players, but they are the ones who really stand out. Do a search on the boards for who the lead BB healthcare players are -- I think Jefferies is generally viewed as the best now due to a defect from Credit Suisse, but I'm going from memory. Deal flow is ridiculous, probably better than any other industry. There are an endless amount of healthcare deals to be done.

Can you get into other industries or are you stuck in a niche industry for the majority of your career?

No limitations.

Are the HRS/ Comp any different as oppose to other industries?

From my experiences and those I've spoken with, Healthcare hours are generally the worst of any industry vertical. Comp is in line with other industry verticals.

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Feb 22, 2012

If you could change one thing about your career path what would it be and why.

Tough question. I've been surprisingly happy with the path that my career has taken, although I admit that has largely been due to luck. If I had to choose something, I suppose it would be to pursue roles with more international exposure. I find international work fascinating and love opportunities to travel abroad for both work and pleasure. Unfortunately, MM IBD and MM PE offer little exposure in this area. As I get further along in my career, I recognize that it gets more and more difficult to transition into such a role (for example, an emerging markets focused investing firm, or an international transfer within a fund). I've always held out hope that one day I would be able to move to Europe or Latin America to practice PE there, but as I do more research this seems less attainable. I've come to view this as icing on the cake and don't let it frustrate me -- the reality is that my "dream job" likely doesn't exist and I don't want to be unhappy when I'm already in a pretty fantastic position.

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Feb 22, 2012

What are your thoughts on going to b-school if you land a BB analyst gig right out of undergrad. Is the MBA still worth it or would two years of higher level work experience be more valuable?

I think an MBA from a top ranked program is incredibly valuable for all the common reasons cited -- network, experience, career acceleration, prestige, etc. What I think is overlooked is the value of an MBA as a safety net. The reality is that your career almost never goes according to plan, often times for reasons outside of your control. I'll give you two examples:

1) You're working as an analyst at a BB investment bank. Things are good -- deals are getting done and your team likes you. Three years later you're offered a direct promote from analyst --> associate. Not wanting to forego two years of earnings nor pay for a costly MBA, you accept. A few years later, shit hits the fan. You don't get promoted to VP, or maybe you start to suffer from extreme burnout because you've been working non-stop for six years. Governmental regulation may restrict your pay, and all of a sudden the job isn't as attractive. Maybe you meet the girl of your dreams and want to start spending time with her; perhaps settle down and start a family. Whatever the reason, if you find yourself in a position where you want to start pursuing career alternatives, your options are far more limited without an MBA.

2) Say you work in a PE firm and have been absolutely crushing it. You're given an opportunity to "skip" the MBA and are promoted directly to a post-MBA role. The partners love you -- you get along great with them and do good work. Your future is looking bright. However, over the course of the next five years, the fund's investments aren't performing well. When the team goes to fundraise, they are unsuccessful (this is happening a lot these days). Even worse, maybe the partners' plane goes down and a number of key employees are lost. All of a sudden you find the fund is winding down and you're off looking for a new job. You don't have an MBA network to tap into to help find a job, and what's worse, you're searching for a Vice President / Principal job without an MBA. Hiring will be significantly more challenging. While the partners at your shop thought you were a rockstar, this isn't something that you can convey on a resume. As a result, you're going to face an uphill battle. Having an MBA in this circumstance wouldn't save you, but it would certainly start to feel like a good investment.

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Feb 22, 2012

Would you say that meeting me was a great moment in your career or the greatest moment in your career?

It was undoubtedly a great moment, and quite possibly the greatest. The second I laid eyes on you, I realized that I didn't want to end up like you, and it motivated me to work hard and be as successful as possible. In many ways, you could say I owe a lot of my success to you.

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Feb 22, 2012

Do you agree that the most difficult part of the job at ibd is to pick up the industry knowledge, which most of the time are updated fairly quickly, instead of modeling? If so, is there a knack for picking up these industry knowledge quickly on the job?

As a previous summer intern at a BB, I got the feeling that modeling is not the most difficult part of the job at ibd. After all, one can get the hand of it after working on the models after a few deals.

I definitely agree. Modeling is not inherently difficult. Modeling can be very time consuming depending on how complex the situation or the degree to which you are running the numbers. However, in the end it is a very logic oriented task. Numbers are inputted and an output is generated and the model is either working or it isn't.

Industry knowledge, and more generally business knowledge, is completely different. Business knowledge encompasses an ever changing landscape of companies, people, interactions, trends, etc. Having someone on your team who knows an industry cold, such as who the major players are -- their go-to market strategies, their competitive advantages, their product portfolio, etc. -- is infinitely more valuable than someone who can model a make-believe projection scenario.

In terms of picking it up quickly, I believe this is mostly a matter of concentration and effort. When you're an analyst, it is easy to resort to being a "processor." This is someone who essentially goes through the minimal motions to get their work done. For example, they might create a slide in a management presentation that shows the top ten customers and the percentage of total revenue that they represent (a customer concentration slide). Some analysts assemble this without stopping to pay attention to what the data is saying. If a senior banker asks the analyst why the company has such high levels of concentration, a poor analyst will shrug their shoulders because they haven't stopped to think about it. They were only interested in slapping the data on the page and going to bed. A good analyst will have an answer that demonstrates knowledge of the company, that they "get it." Maybe the company's CEO used to work at the largest customer, and therefore he was able to obtain 100% of that customers business. Whatever the reason, the analyst won't know unless (s)he is paying attention, able to connect the dots, and takes the time to assess the "why" behind the data. In reality, few analysts are able to do this.

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Feb 22, 2012

I am a 2nd year Analyst at a BB, and want to be in PE long-term. Have already reached out to HHs and landed a few MM PE offers. Can you please give a 5-year (ideally 10-year) outline of MM PE all-in compensation, and promotion scheme?

MM PE comp is highly dependent on the individual PE firm. For someone with two years of investment banking experience, the low end of all-in MM PE comp will probably be in the $125K range (micro funds) up to ~$250K (large cap funds). It is very rare to get carry as a pre-MBA associate, though some firms will offer a nominal amount. You can expect to stay as a pre-MBA associate for 2-3 years (many will tell you that their pre-MBA program is either 2 or 3 years). After that, you're usually required to get an MBA.

Once you have an MBA, your title will either be Senior Associate or Vice President. Expect compensation on the very low end (micro funds) to be ~$175-200k. I really can't comment on the high end, but I would guess it would be somewhere in the $300k-$400k range. At this point, about 50% of funds will offer some level of carry (according to a 2012 PE compensation report I have (--no, I won't share it--)). Promotion at this stage largely depends on performance, deal experience, personnel needs, and overall contributions. Expect a minimum of two years and a maximum of five.

The general organizational structure tends to be: Analyst (pre-banking, some firms don't have this position) --> Associate (post-banking, pre-MBA) --> MBA --> Senior Associate --> Vice President --> Principal --> Partner

Also, can people from Top Law Schools make the move to PE with only IBD analyst experience? I was accepted to Harvard Law School, and chose to defer for my analyst stint. I'm slated to start at HLS this fall, and was wondering if I can land post-MBA PE roles straight out of Law School. I can take classes at Harvard Business School as well (up to 10 credits), will that help me in any way? How receptive do you think firms will be, if I take part in HBS info sessions, and networking events? One of my friends is a 0L at UPenn, and only has IBD summer internships. Can he end up in PE after Law School?

I don't know anyone that was successful at transitioning from law school directly to PE, even with prior experience in banking. Without prior experience in banking, I'd say that there is an absolutely minimal chance. I think your best bet would be to do a dual degree MBA/JD as this offers the most flexibility. I don't think 10 credits at HBS will make a difference. Most of the senior PE professionals I've spoken with do not view the actual classroom learning as valuable, so the fact that someone has attended MBA classes is not significant. Investment Banks seem much more willing to hire law school students (in place of MBAs), so my best advice would be to return to banking after school and try to flip over to the buyside through networking.

In reality, I don't know how you'll possibly survive three years at Harvard Law knowing that you don't want to practice law for a living. Law school is absolutely brutal (I've watched more than a dozen friends go through it). Like anything else in life, you won't perform well in the long term if you don't have a passion for the subject. It sounds like you don't have a passion for law school. Even though it is Harvard, I suggest you matriculate in a program that you are actually interested in.

After L-School, assuming I get into BB IBD as an Associate, and move into PE at a post MBA role, how would PE firms judge my law degree? And how many years do I have to stay in IBD before making the switch?

Really difficult to say how PE firms would view a law degree from someone working as a BB IBD Associate. I suspect this sort of assessment will really come down to the individuals evaluating your profile. Some people might like the diversity of skillset, while many might ding you for taking a non-traditional approach. I suspect it will hurt you more than help you as it raises all sorts of questions. Why didn't this person get an MBA instead of a JD? They left banking to get a law degree, only to return to banking? While you may be able to address some of these questions, they will cast doubts and some firms won't even give you the chance.

If you do go down that path, how long you stay will be largely dependent on you. It may sound silly, but I've heard of people lateraling out of the IBD associate role after only a few months in, while others take years to build up a network in order to successfully make the switch. Your results may vary.

Lastly, how difficult is it to get a post-MBA position without having/getting an MBA?

From what I've seen, getting a post-MBA job in PE is extremely difficult even with an MBA and with prior PE experience. I know of two recent HBS grads who had banking/PE experience before attending HBS and upon graduation, they didn't have PE jobs lined up, despite heavy interviewing. They eventually found them, but it took a mental toll and a couple months of unemployment. If you have neither of these, you'll be facing a very uphill battle and will have to rely heavily on your banking experience, interview skills, and network.

BTW, do you plan on applying to B-School down the line? After all, you worked hard to get a 760 on your GMAT.

Yes, that is currently my plan. It isn't required, in fact, the Partners at my shop would even prefer I didn't leave for 18 months. However, for the reasons I mentioned in a post above, I think it is worth it.

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Feb 22, 2012

To the HLS matriculant: look into distressed debt/ turn-around investing. I think they actually need lawyers there, and it's pretty close to PE

Feb 22, 2012

What's your opinion on dating women from other countries?

Fortunately, I have a LOT of experience in this area. In fact, I have more international dating experience than I do work experience -- maybe I've giving advice on the wrong subjects? Anyways, I highly recommend it. The best ones are those who speak multiple languages and have spent significant time in their home countries. This enables you to travel with them and stay with their friends or family. It's like having an international vacation home without the added expense and headache.

    • 1
Feb 22, 2012

Provided that you don't have an MBA, how easy is it to lateral to other MM PE shops at VP/Principal level if you get laid off? And once you make partner, do you become immune to lay-offs?

My understanding is that the VP/Principal level is the hardest point to lateral between PE firms. At this point you're expected to have a lot of transaction experience and a functional network of professionals (industry contacts, service providers such as bankers, lawyers, etc.). Basically, you're expected to have a reputation in your market. If you lateral to a firm that has a different investment focus (industry, LBO vs. Growth Equity vs. Distressed, geography), a lot of your contacts and experience are no longer relevant. This sincerely limits what you bring to the table.

Furthermore, there are far fewer openings at the VP/Principal level than there are at the junior levels. Junior levels have a high level of churn due to how the pre-MBA experience is structured. Turnover from folks leaving to get their MBA or burning out creates a lot of openings. Once someone has attained VP/Principal level, they are a "career investor." Spots tend to only open up when someone gets promoted, fired, or leaves and there is no internal candidate to promote into their position. This all compounds with the fact that many PE firms run extremely lean at the mid ranks (hourglass organizational structure), making it extremely difficult to lateral at the VP/Principal level.

As for partners, they certainly aren't immune to layoffs. Partners are ultimately responsible for deals that they back and essentially have a set of deals associated with them. If that partner's deals aren't performing relative to other partners, it wouldn't be uncommon to see the under-performing partner essentially "voted off the island." This is most likely to occur at or near fundraising.

On average, how much higher is the all-in comp in MM PE, compared to BB IBD?

It's hard to compare two sets of highly variable datapoints. Once you get to the mid/high level ranks in PE, a lot of your upside comes in the form of carried interest. As a result, if your fund crushes it, you can easily be making millions while in your 30s. Your fund could also crumble and you could be living off your base/bonus (which is still hundreds of thousands of dollars). BB IBD is largely the same way, except they rely on revenue generated rather than fund performance. If I were to guess, I'd say that the MM PE is a comfortable 20-50% higher than BB IBD in light of the recent compensation changes at investment banks.

I'd say the main difference is stability. In PE, your base and bonus is typically paid by the 2% management fee as well as transaction/monitoring fees charged to portfolio companies. Even in bad economies, these fees are stable. As a result, you see a lot fewer layoffs in PE during the down cycles. At banks, the motto seems to be "overhire and overfire."

Have you seen anyone make the jump from MM PE to Mega Funds?

I know of one guy who went from a lower MM PE fund to a megafund as a pre-MBA associate. This is extremely rare though and I wouldn't count on it as a possibility. In reality, the skills gained/required in the MM are quite different than the ones gained/required at megafunds, so it is unlikely that someone will be highly successful in both areas.

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Best Response
Feb 22, 2012

Could you go into some depth about effective networking? After the cold e-mail and information interview, what are good ways to follow up and keep the relationship going (yes, I have the WSO Networking Guide)?

I'll be the first one to admit that I've done very little networking outside of that required of me for my job. I've also yet to read any of the networking guides available. However, I've had a number of people attempt to network with me and I can share my thoughts.

First, networking works best when you start networking early. If you're looking for immediate results, it is likely too late. You want to build a network in anticipation of your needs. As an undergrad, this means you shouldn't wait until the spring of your senior year to start picking up the phone. Build the relationship in advance so that when you do want someone to pass along your resume or support your candidacy, it isn't someone that you introduced yourself to that afternoon.

Second, find something in common with the person. This is why networking with alumni is so easy/successful -- because you instantly have a connection. When I go on marketing trips to meet with bankers and attempt to establish a business relationship, I never start the conversation with "what deals do you have that you can show me?" I start off by talking about the city I'm visiting, sports, deals that they completed, anything possible to establish that connection and ease into the relationship. People want to do business / help people that they LIKE and share common interests with. After the connection is established, then you get down to business.

You've identified one of the hardest parts of networking -- how to keep the relationship going. This is where the common interest is important. Every few months, you need to find a reason to interact with the person, even if it is an extremely brief interaction. Try to build upon your prior conversation. Things like: "Hey Jim, a few months ago when we chatted you mentioned you were working on closing a big deal. Thought I'd check in and see how it ended up." It doesn't need to be major, but the intent is to remain top of mind with the person and not always be approaching them when you need something. These brief check-ins tend to work best if they don't require a mammoth response. Two to three sentences would be best. It may even be helpful to immediately write down a summary of what you talked to the person about after a conversation. Jot down some "follow-up items" so that you'll have them at the ready a few months down the road.

Furthermore, if you ask someone for help on a very specific topic, make sure you follow-up with them to let them know the results. If Jim passes your resume to his buddy Mike and Mike grants you an interview, be sure to thank Jim for his help and let him know whether or not you got the job. I get frustrated when I spend a lot of time helping someone and then they fall off the face of the planet, never letting me know how their interviews went. A one paragraph follow-up email is an easy way to avoid annoying your support network. If they don't want to read it -- they'll just delete it or archive it.

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Feb 22, 2012

What do you know now that you wish you knew when you were in our positions (20-21yo, looking for SA position, etc.)?

Hmmm, everything? I didn't SA, I interned during my senior year in Fall 2006. When I was interviewing for the banking internship, as well as for full time jobs, WSO was brand new and I knew almost nothing about banking. Looking back on my experience, I made failed interviews due to making countless, stupid mistakes. I got lucky and managed to break in at an excellent firm.

While things worked out for me, I certainly didn't have an appreciation for how the first job out of college essentially positions someone on certain career paths. By working in MM M&A, I learned a very particular set of skills and processes that are applicable to MM PE. In MM PE, I further developed those very same skills, and perhaps built some new ones as well. Now, just five years out of school, I have progressed in such a linear fashion that it would be incredibly difficult to change career paths without a major event such as an MBA or starting at the bottom of the food chain. No company is going to hire me as a marketing professional or a software developer. I can't go work in real estate or manage a manufacturing plant. My career is pretty much limited to working on M&A transactions or in finance functions. This is okay for me because I'm very pleased with my job, but not all of my peers feel the same way. I have friends who did IBD/PE, burned out, and are struggling to find employment that makes them happy because they didn't pursue a career in an area that makes them happy.

Fortunately, an MBA offers the opportunity to start over in another business field without moving your career backwards. Also, there is always the opportunity to branch off and establish your own venture, no matter how pigeonholed you feel. Even so, it is incredibly important that you pursue a job out of school that interests you and that you're passionate about because at some point there is no turning back. That point is surprisingly early in your career and many people hit it before they are even aware of their situation.

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Feb 23, 2012

While things worked out for me, I certainly didn't have an appreciation for how the first job out of college essentially positions someone on certain career paths. By working in MM M&A, I learned a very particular set of skills and processes that are applicable to MM PE. In MM PE, I further developed those very same skills, and perhaps built some new ones as well. Now, just five years out of school, I have progressed in such a linear fashion that it would be incredibly difficult to change career paths without a major event such as an MBA or starting at the bottom of the food chain. No company is going to hire me as a marketing professional or a software developer. I can't go work in real estate or manage a manufacturing plant. My career is pretty much limited to working on M&A transactions or in finance functions. This is okay for me because I'm very pleased with my job, but not all of my peers feel the same way. I have friends who did IBD/PE, burned out, and are struggling to find employment that makes them happy because they didn't pursue a career in an area that makes them happy.

Fortunately, an MBA offers the opportunity to start over in another business field without moving your career backwards. Also, there is always the opportunity to branch off and establish your own venture, no matter how pigeonholed you feel. Even so, it is incredibly important that you pursue a job out of school that interests you and that you're passionate about because at some point there is no turning back. That point is surprisingly early in your career and many people hit it before they are even aware of their situation.

I think this is the most important thing you've written in here. I cannot possibly emphasize enough how quickly you get specialized, and how hard it is to break out.

My experience is extremely similar to CompBanker's, albeit I'm a year behind him since I did a third year as an analyst, but I am definitely more in the boat of one of his disaffected peers than I am in his boat of being extremely satisfied.

I've said this several times on this site, but it is worth saying again. PE is a deal-driven profession and one should only get into it, particularly for the long haul, if they enjoy doing deals. Furthermore, even in the middle market, it is highly process oriented. If you are of a creative mind, you will likely get bored very quickly. If you are passionate about doing deals, finance, and learning about businesses in varying industries, PE is an excellent career path for you.

To add, while the hours are better for me in my MM PE firm than they were in my MM IBD group, I actually miss some of the work I used to do there. While neither are particularly creative jobs, I found myself have more freedom creatively in banking because, at it's heart, it is a high-end, sophisticated sales/marketing career. Private Equity is not, it is a hardcore deal-oriented industry, where financial engineering, understanding of legal documentation, and deep due diligence are the name of the game.

I am not trying to be a wet blanket, rather I want to make it clear that CompBanker's experience is not necessarily the experience of everyone who follows the track, so to speak. I've been considering and may start a thread on my experience one of these days to lay out this point of view and take questions, assuming people are interested.

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Feb 22, 2012

How can I be more like you? You are my HERO!!!!!

You basically ARE me, only a few years older and a few years behind in your career progression. Relative to everyone on this board, your current situation pretty closely resembles mine.

Feb 22, 2012

How much do you deal with lenders, and what sort of creditors do you usually work with (ie mid-market commercial banks, alternative/mid-market lenders, etc)?

I deal with lenders extremely frequently. Too frequently in fact. Middle market lending has become a commodity business, and every middle market lender will admit it. Like PE firms, there are a ridiculous large number of lenders chasing a limited supply of good transactions and their money is as green as the next guy's. The only way they can differentiate themselves is by offering the best pricing, the most lenient terms, or the highest leverage. Not exactly the best business model.

That said, the majority of the lenders I deal with are either dedicated funds (such as a Caltius Capital), or mid-market commercial banks (such as Bank of Montreal). It is rare that we issue high yield debt or anything that would attract the hedge fund market. Working with lenders we know well is extremely important to us and therefore we have a small selection of 5-10 groups that we show almost every transaction opportunity.

Would you ever see yourself moving up the capital structure or across the liquidity spectrum to a hedge fund?

Personally, I am quite pleased with my current position. Based on my limited exposure to hedge funds, the type of work they do is extremely different than my day to day responsibilities. I hate the public markets (data overload, short term outlook, no exposure to management, no ability to manage or improve the company as an investor). I can certainly see why it may be appealing, but it just isn't for me.

What is your perspective on people with different experience (a debt strategy or a liquid strategy) making the move to PE?

Fundamentally, the junior levels of PE require knowledge/skill in a few broad categories:

The first category is knowing the deal process. This means understanding the documents involved and having the ability to navigate and interpret them. Someone that has been focused on providing debt for LBOs can easily make this transition even if they've never worked on the equity side a day in their life. Someone coming from the public markets would be starting from square one.

The second category is business acumen. This boils down to identifying what makes a business attractive and knowing how a business operates. An LBO lender would likely do well here, as long as he was able to make the mental leap between evaluating companies from a credit perspective (risk profile) to an equity perspective (growth potential). My personal belief is that someone who has been working at a hedge fund or in the public markets is probably not as advanced in this category as they may believe they are.

The third category is financial knowledge. This is the least important outside of the junior levels and includes everything from modeling to interpreting financial statements. Someone from a non PE background can easily demonstrate this.

Returning to your question, I think someone who could demonstrate a strong aptitude in categories 2 and 3 could successfully make the transition. This could be a struggle for many people, and you'll often be overlooked for someone with 2+3 and relevant process experience, but I think it is achievable.

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Feb 22, 2012

Great thread. I actually cannot think of a better degree than a HLS degree supplemented with a few standard business courses from HBS. Legal, tax and structure drive so much of PE deal-making and being able to control documents is a very powerful skill within PE. Plenty of people have demonstrated an ability to leverage a law degree into a finance role especially with the right internships, coursework and networking.

Feb 23, 2012

Leonidas, I dont want to highjack the thread on this issue but understand that coming from a non-traditional background will be an uphill battle. Getting into PE post MBA (even with pre-MBA PE experience) is extremely difficult and highly competitive as PE shops generally run very lean and the applicant pool is generally very talented and pedigreed. With that said, if you applied to my shop with a degree from HLS, did a banking or PE internship and took the relevant coursework at HBS I would absolutely interview you and am confident based on past experiences that plenty of other shops would as well. A top law school like Yale or Harvard is far more academically rigorous thank b-school (generally speaking) and requires a greater deal of critical thinking, reading ability, and communicative abilities (written and oral). These skills are integral in PE as we spend most of our time reading documents, drafting documents/presentations, updating models and thinking critically about investment opportunities. Best of luck to you and thanks to Comp banker for taking questions.

Feb 25, 2012

I'm a 2nd year Analyst at a M&A/LF/FSG BB group and am starting the buyside recruiting process focused on MM funds for Summer 2012.

I'm a bit of a non-traditional candidate in that I graduated in 2008 from a semi-target and have had 2 other jobs before my current role.

As someone who screens/interviews/hires Pre-MBA Associates, can you talk about how you would view a candidate such as myself? Too old and unmoldable? Or more bang for the buck in terms of experience?

Headhunters I've spoken to have all told me I'd be viewed as the latter, but then again, they're headhunters.

I generally find that people are willing to have some leniency for those who didn't go to banking straight out of undergrad. This is especially true these days where you've got very accomplished, intelligent people who end up lateraling in after a year or two. In fact, I know more than a few people who ended up at very prominent MM PE shops after being in a very similar situation. Don't let it hold you back.

While everyone will treat your prior experience differently, I think in general people will disregard it entirely and you won't get any credit. Unless the skills you learned are relevant to the job you're interviewing for, an extra few years of employment really won't count for anything. Your interviewers will focus very heavily on your banking experience to the exclusion of most everything else. The good news is that if the skills you learned are relevant, it will likely position you to do better in your interviews.

Feb 25, 2012

Is your post-MBA position with the same firm you were a pre-MBA Associate with?

Nope. My prior PE firm didn't do direct promotes that enabled people to skip the MBA.

In PE, is "carry" your bonus, or are they two separate things?

Nope. In PE you get a base + bonus structure and the carry comes on top. From what I've seen, bonus is generally 50% - 100% of base. Sometimes at the Partner level there is no bonus (it's 100% base). This helps avoid arguments amongst the Partners about how much each of their bonuses should be. Besides, at the Partner level, the lion's share of the money comes from Carried Interest.

On average, how many years does it take to advance through each of the ranks?

I think I covered this in a prior response about compensation. Expect a MINIMUM of 10 years post-MBA to make Partner and a maximum of about 20 years.

How much, if at all, does regulation affect comp (like it has in IBD) in PE? Do you think the MM PE landscape will change much in the next 10-15 years?

I haven't seen any changes in the compensation structure due to regulation. If anything, I've seen small upward movement to account for inflation. However, I think if banking takes a substantial hit, PE will likely reduce the pay to its junior employees. I believe the PE is purposely priced at a premium to IB to steal talent. Honestly, I think the biggest driver of PE pay changes will be the result of any changes to the 2/20 structure that PE firms tend to have (2% management fees / 20% profits). If Limited Partners start demanding more attractive terms from PE firms, it is quite likely that compensation will get cut across the board.

At what level (VP/MD) does mobility from IBD to PE become improbable?

I think that once you're a VP in banking, you're going to be very hard pressed to make the transition to PE. Equity investing requires a very different mindset than banking and it is sooo much easier to promote someone from within with experience. There is already a large supply of folks trying to make it to the VP/Principal level at PE firms --- a banker looking to lateral will struggle.

That said, there is always the opportunity for someone with industry experience to become an Operating Partner very late in their career. Lots of ex-General Electric managers have become PE operating partners at PE firms looking to differentiate themselves with "operating experience." These people tend to be very successful in Fortune 100 companies though -- it isn't exactly an easy alternative to sneak in the backdoor to PE.

How are the exit opps to CorpDev/CorpStrat at F100s? And at what level do they typically enter at (Director/VP), and after how many years of doing PE at the post-MBA level?

This I am not too familiar with. From the job postings I've seen for Corp Dev positions at F100s, they tend to like to hire bankers/PE guys. I could be wrong, but the difficulty see is that the equivalent Corp Dev position pays substantially less than banking, so at any given point in your career you'll likely need to take a pay cut to make the transition. This is even more pronounced in PE. I've never heard of a PE guy leaving PE to be a mid-level guy in F100 Corp Dev group.

Any other exit opps besides going the F500 route?

Sure. I once worked with a guy who went Wharton --> ME PE, did this for five years and then left to go become CEO of a small manufacturing plant. Many talented early 30s people take prominent financial positions (controller, CFO) at small businesses. Some use their business acumen to start their own companies. Another thing I've noticed is that sometimes people leave PE to join a portfolio company that they own/owned. This is sometimes temporary and sometimes permanent. Not a bad choice if you can get a handful of equity and are looking for a chance. There are a number of options overall, but usually they all revolve around business (particularly finance) to some degree.

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Feb 25, 2012

How shitty would it be to lateral to a different group within your bank, about 9months after your start date? (the new group would be in the same building, and use the same elevators as my old group)

It would be pretty shitty. It is easy to try to justify your move by saying that you're remaining with the same company, but managers don't think of it that way. Groups often act incredibly independently, particularly in large organizations. Sometimes they need to manage their own P&L and usually aren't particularly fond of having an employee transfer out. To them, this is akin to out-right quitting. Add to this the fact that you're likely to run into these people on an ongoing basis and you've got a recipe for hurt feelings. Tread lightly.

How do explain myself properly?

Not sure what you're looking for in terms of how to explain yourself. I am usually a big fan of telling the truth (assuming it isn't because you hate them). Your best bet is probably to tell them that you believe this is the right move for your career, that you've had a great time working for them, and that you want to continue to stay in touch (grab lunch together or whatever). Some people will take it well, others won't.

Would it be best to wait until I receive an offer to make my intentions known? or should I let my manager know what im thinking about doing before the final interview?

I don't think you're going to be given a choice whether or not to wait until after you've received an offer. From what I've seen at non-finance F100 companies, many of them have an anti-poaching policy where one group can't interview you without the approval of your current manager. This obviously sucks because you don't want him to know you're looking at other opportunities, but that is one of the reasons they have the policy in place. I suggest you look into this.

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Feb 25, 2012

Comp, we seem to be in very similar roles and at similar points in our careers. I am also contemplating business school but am hesitant to drop out of the workforce for 2 years. What is your perspective on PT MBA/EMBA programs based on your experiences within your firm and outside peers?

My shop is actually a huge supporter of PT MBA programs and they have already mentioned this to me on a few occasions. I looked into them and overall, I wasn't impressed. If you're already in a job that requires a huge amount of time, you'll be on the brink of collapse if you tack on a PT MBA. Take a look at the "day in the life" or the Wharton PT MBA participants. They all claim to wake up at 5am, multi-task their way through their days, and generally not have a moment for anything outside of work, school, and family. These people aren't even in the "deal-making" business. If I've got a deal closing on a Friday, I'm highly skeptical that my boss is going to be okay with my leaving early to catch my flight for my MBA class. They also aren't going to be too keen on my passing off work to get my group projects done. Personally, I already did my two years of slaving away as a banking analyst -- I don't want to sign up for two more.

On top of that, I notice very little time seems to be spent networking with your fellow MBAs. You're either working on a group project with them or you're catching a flight back to your home city. To me, this eliminates one of the central reasons to get an MBA in the first place. Odds are most of the people are weekend commuters too -- I believe the stats are posted on the program's website.

The PT MBA obviously serves a purpose and is a good fit for the right people. If you have limited finance knowledge and want to get deep into the technicals, a PT MBA is a great way to do that. Furthermore, when you're laying out your biography on a slide for a potential investor, they aren't digging in to whether or not your got your MBA PT / FT (and I don't think they care). The pedigree is just a check the box / cover your ass thing for them.

In terms of the cost -- I try not to let this factor too much into my decision making. First and foremost, I want to make the right decisions for my career and if it sets me back a hundred grand I'm okay with that. At these levels of compensation, $100K - $150K is easily recovered. Besides, if I don't spend it on my education, what else am I going to spend it on? More prestigious car? Extra 200sq ft in my apartment? A bigger diamond engagement ring? I'd like to think that even if I didn't stay in PE, I'd be able to find a way to make enough money to keep me satisfied through entrepreneurship or another well-compensation position.

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Feb 25, 2012

Have you personally seen anyone make the transition directly from Law School to PE with no previous PE background, and only IBD Analyst experience?

I have not. Though, in the grand scheme of things, my sample size is relatively small. My best recommendation is to go on the websites of all the PE shops you can find and look at the backgrounds of their senior associates / VPs. Almost every PE shop posts their full team bios, which will give you a very good idea of what the current trends are and who is actually being hired. It is easy to make generalizations based on a few anecdotes, but this methodology presents reality.

Since you say MM IB is more suited to MM PE, what can BB IBD Analysts do to make up for it?

BB analysts tend to bring a very linear skillset to the table: they are excellent financial modelers. They usually have a great grasp of the technicals and strong academic credentials. What they lack is process and business knowledge. As a BB analyst, it is important to try to get as much exposure to the entire deal process as possible. Understand what the key documents are, how they read, what they say, and how they fit into the overall picture. More importantly, PE applicants need to understand how to evaluate a business. I've seen a ton of BB analysts analyze a CIM and say: "This is a bad business -- it has high working capital, low margins, and a low growth rate." They fail to even mentioned sustainable competitive advantages, the competitive landscape, business opportunities / risks, etc. This tends to be their biggest flaw.

Finally -- and not something you can really control -- but try to get as much client interaction as possible. I mentioned in my Q&A (link is above) that I always ask banking analyst the question: "If I were to call up the senior management team of the client listed on your resume, would he know your name?" Most BB analysts say no and pretty much all MM analysts say yes. Try to get this exposure because client interaction will be critical to your success in PE.

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Feb 25, 2012

I want to ask about Master of Finance or the likes. How do you think about it? I heard that we can still get an internship between your senior year and your master program, then how could you tell the companies about it on your resume?

While ANT is the best resource for Master of Finance topics, I've only ever seen them useful in the banking industry as a way to extend graduation by a year while learning relevant materials. As such, I only recommend that you do a Master of Finance immediately following your senior year (hopefully with an internship in between graduation and matriculation). In theory, you'll only want to do this as a non-finance major as much of the material covered will be redundant. The only exception would be if you can get into a Masters of Finance program that is significantly more prestigious than your undergrad program, such as going from a state school to MIT.

In terms of telling companies about it on your resume, you could address it in your interviews or on your cover letter. If that isn't satisfactory, once you've been accepted you can put it on your resume and put "Expected Graduation: May 2013" (or whatever the date is). Obviously you won't have started the program yet, but I view this as an acceptable resume tactic if you're 100% sure you'll be matriculating in the fall after your internship.

Feb 25, 2012

Since you clearly seem interested in developing operational improvements in your portfolio companies, why wouldn't you actually try to be the business owner rather than work as an employee of an investor in those companies? Wouldn't you find that to be more rewarding professionally and financially? (Hint: I do.)

This isn't really a fair question to ask anyone. Would I rather be a business owner of an established business with millions of dollars of profitability rather than someone who invests in it? Sure, of course I would, but that option isn't really on the table without jeopardizing my established career. While being an investor may be less attractive than being a business owner, it is a far less risky path as well.

Also, one of the benefits of PE is that it is truly a Partnership (with numerous owners). Once you've worked your way up through the ranks and make Partner, it is very similar to owning your own company (with numerous others). You get to start calling the shots, just as you would in a normal company. This is a pretty attractive light at the end of the tunnel for those of us with some degree of entrepreneurial spirit.

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Feb 25, 2012

You mention that your read the Wall Street Journal everyday. Everyone keeps saying that the WSJ is inadequate with a lot of "fluff" and should be supplemented every morning with the Financial Times. What are your thoughts on getting both papers? If you had to choose between the Financial Times and the Wall Street Journal, which would you choose? I'd like to be fully informed but at the same time, I want to be efficient with time and read what I can without being late for work in the morning?

I used to read both, but that proved too time consuming. I really enjoyed reading the FT, but I found that it was too internationally focused to be relevant to my job. So while I enjoyed learning more about the world, it didn't make practical sense for me to invest a lot of time into reading it. As for the WSJ, I continue to at the very least read the headlines every day. Usually I read 10 - 15 articles throughout the day. Some of them related to finance, some politics, some real estate, some just general life. I find that this is enough to give me a good feel for what is going on in the world and not be caught blind-sided by any current events conversation. While I would recommend that everyone finds a decent paper and at least skims it every day, I don't recommend that anyone reads the paper cover to cover. That would be an incredible waste of time.

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Feb 25, 2012

How often should I e-mail the recruiter for my status in re the job? I don't want to come off too aggressive and annoy the recruiter, but at the same time, I don't want to get lost in the shuffle. By the way, I hear that internal referrals for this particular company I PM'd you about do not work well because HR likes to decide on their own. So from one standpoint, I have to stay in touch with recruiters and leave a good impression, but I don't want to become a pest.

What are your thoughts?

I think once every couple of weeks if you haven't heard anything is plenty. If they say: "Well get back to you on Monday" and it is the following Wednesday, then you can ignore that advice, but it doesn't sound like that is the case here. Also, I'm hesitant to believe that HR "likes to decide on their own. Almost every large corporation has some sort of "referral program" that rewards employees for recommending friends that get hired. It is usually a very cheap way of identifying and hiring good employees. Furthermore, unless you're applying for a job within HR, the ultimate hiring decision will be made by the group / person who put out the job requisition. If your referral is from a person who works in or with that group, HR damn well better take into consideration the opinion of referral source.

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Feb 25, 2012

I've been an analyst-associate promote at a boutique for 3+ years now and frankly am pretty lost in this whole "next step" ordeal. As a generalist, i don't really have an expertise in a certain industry but do have a wide range of experience across the field. Do you have any advice for someone like me? It seems a natural next step would be to get an MBA to move onto the next stage of my career, however, I don't feel like I'm going to be too competitive in the process as my grades were really bad in undergrad (which is also one of the reasons i havent had much success at transitioning out of it).

i've been looking at going into corp dev / corp fin and maybe that's where i should look to next.

It is really hard for me to give you a recommended path when you haven't identified where you want to end up. I think you need to figure out what interests you and then work backwards to figure out which career path would be a good fit. If you're an analyst--> associate promote, it would seem that you have a very defined path to make MD should you elect to stay at the boutique. It doesn't sound like this interests you, otherwise why would you have made the post? As for Corp. Dev., I'm not quite sure this will be that different from your current job as they are both strategy/deal making functions.

As for the MBA, I wouldn't let the fact that you had really bad grades deter you from at least applying. Applying takes a lot of time and effort, but it doesn't stall your career. A high GMAT can help compensate for low grades, so you aren't totally lost yet. Even if you elect not to matriculate, you'll at least have created the option for yourself. I would imagine that for someone who had a poor undergrad experience (grade wise) and is unsure where they want to take their career, the MBA could be a great tool for you to find direction and plug any holes in your resume. At least give it some serious thought before writing it off as a viable alternative.

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Feb 25, 2012

Is The U of Michigan considered a target school?

University of Michigan isn't a bad school at all. I define a target as one in which banks conduct on campus recruiting for the IB division. You'll need to check with some UofMichigan alumni to answer that one.

Feb 25, 2012

Do you wear cufflinks to work? Why?

I wear cufflinks about 75% of the time. I'm a cufflink collector and really like the look, so at this point at least 50% of my work shirts have french cuffed. I'm up to about 20 pairs of distinct cuff links. I've stepped it up since obtaining my most recent position, mostly because my dry cleaner has a habit of absolutely destroying the buttons on the sleeves of my regular shirts. While they charge more to dry clean cuffed shirts, there is no risk that the sleeves come back with shattered buttons.

Feb 25, 2012

Just noticed you scored a 760 on the GMAT. How much preparation did you do for it? and which materials/study guides did you use?

I used the Manhattan GMAT guides and the official guides. I probably studied a total of 2 - 3 months, mostly on weekends. For me, I have a pretty strong math background and native english language skills, so I didn't require as much study as many other people. I basically went through each of the Manhattan GMAT books once and then did all the practice problems in the official guide. I then took the CAT tests and looked up the problems i got wrong on Lastly, I went back and reviewed the concepts in the Manhattan GMAT books that I didn't fully understand (which were made evident by errors in the practice exams). The days leading up to the test, I did the practice problems in the two supplemental official guides.

While there is nothing really special about the above, two little things that I think make a big difference are getting a good night sleep and using an official practice pad when you're studying to get used to taking notes on a dry erase pad. You can buy the pad really cheap on Amazon and it eliminates the "on the fly" adjustment of taking the test with a marker. Finally, I think a good night sleep can easily make a 50 point difference on the test. Take a sleeping pill if you have to.

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Feb 25, 2012

Any other general advice on what extracurriculars/opportunities I should take seize hold of while in college?

Coming from a non-target, the most important thing you can do is keep your GPA sky high. You should be aiming for a 3.7 minimum (I squeaked by with a 3.7, but I admit, I would have been much more comfortable going through recruiting with a 3.8 or a 3.9). If you are truly passionate about finance, it should be easy for you to obtain a 4.0 in those classes. That's half the battle right there.
In terms of ECs, just do what you're passionate in. Leadership positions always help, but are not always obtainable. I suggest you find two additional activities that you really like and pursue those. Personally, my two were being a Resident Assistant and tutoring calculus/statistics. I also played intramural sports, was in student government, and studied abroad. Some people see these as "check the box" activities, but I think they are valuable. The truth is you have more free time in college than you can possibly imagine, so don't waste it staring at the TV or playing computer games all day. You can still watch some TV and play computer games -- but be sure to carve out some time to participate in ECs and secure good grades. Once you start working, you'll realize the lifetime value that these two things provide.

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Feb 28, 2012

Hi CompBanker: What are your thoughts on London Business School for the Master's in Finance? I wouldn't want an MBA from there because I only would want to focus on Finance for an advanced degree later in life. The Master's in Finance at LBS can be done in only 10 months. Is the program heavily respected here in the US? Ideally, I'd want to return to the US upon completing it.

Don't do a Masters abroad if your goal is to work in the states. While the current younger generation is generally very globally minded, the senior people that are running investment banks and PE shops are definitely not. I've discussed international programs with a lot of senior people, and most have never heard of INSEAD or have no idea how competitive LSE or LBS are. You'd be facing a major upward battle to attend one of these schools with the intent on getting a job back in the states. I'm speculating, but you may find that some of your finance classes at LBS focus on European finances rather than U.S. GAAP, etc. I've looked through LBS's curriculum before and their classes are very "global" in nature. Not only would you risk confusing yourself learning finance in these programs, but you'd also learn a lot of things that wouldn't be relevant to your job in the states. Proceed with caution.

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Feb 28, 2012

Any general advice for anyone starting FT this year; especially considering the current finance job market?

I'm going to copy my response to a similar question posed on the Q&A linked in my initial post:

I was an M&A analyst at the height of the boom period in 2007/2008. We were working at absolutely capacity, and the bank often turned away live deals because it was executing as many as it could handle. This meant that 100 hour weeks were common and all-nighters happened once a week. Not a day went by where I didn't get a serious urge to quit. Looking back, I couldn't be happier that I stuck it out. While sticking it out for two years may not be the best choice for everyone, I encourage analysts to put in a good-faith effort before quitting. It is almost impossible to realize the profound career and personal benefits of the analyst program while going through it.

Probably not exactly the kind of advice you were looking for, but you'll understand once you're deep into the throws of your analyst program.

Mar 4, 2012

I'll be starting FT at a top MM bank in IBD in a regional office with a specific industry group, but I was wondering if you knew how easy it would be to transfer to NYC or an Asia office (Beijing/Hong Kong). Are you aware of anybody who has done this before? And what would be the timeframe and/or steps to take that you would recommend?

I only know one person who has attempted (and successfully) transferred abroad from a MM IBD shop. That person was only able to transfer because there was an internal need for an analyst abroad. I suspect that in general it is very difficult to get some of the smaller MM banks to pay for you to transfer abroad, unless there is a very high need or you possess a difficult to come by skillset. Essentially, I wouldn't rely on it.

For some of the more sizable MMs such as Robert Baird, I think you'd have an improved shot, but would still face an uphill battle. You sign up for a two year stint -- what benefit do they have sending you to a different office, with new people, for such a short period? The reality is very little. If you're convinced that it is what you want to do, I would bring it up at your six month review or at your annual review. Offer to stay for a 3rd year if they are willing to let you relocate. This would obviously be incredibly painful if you planned on exiting after two years, but it may greatly improve your chances.

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Apr 14, 2012

What tips would you suggest someone going into BB IB as a post-MBA associate to eventually make the switch to PE? Should one target MM or megafunds? Should they make the switch at the 1-year mark, as an A2/A3 or at the VP/MD level? Do PE shops care about someone with like experience in a part-time PE gig while in school?

The best advice I can give you is to ensure that you establish VERY solid relationships with your PE clients. The number one way that I've seen post-MBA banking associates move to PE is by getting hired by a client (or even a buyer) after working on a deal with them. Treat the engagement as an extended interview process and if you can prove you have top notch talent, you'll stand a shot at scoring a spot at the PE shop. Note that this does not always work, but it is the most frequent occurrence that I have seen.

As for targeting MMs or megafunds, I'd say go for both. They certainly aren't mutually exclusive and the list of megafunds just isn't that long. I'd reckon that you've got a much stronger shot of moving to an MM given sheer numbers, but I don't see a reason to limit yourself.

For making the switch -- you ought to do so ASAP. The longer you stay in banking the most difficult it becomes to transition to PE. As a post MBA with banking experience, I'm guessing that most shops will want to hire you into the same role that they hire their direct MBA students. Basically, you won't get the same amount of "credit" for your years in banking as you would if you had been hired directly into the PE firm from your MBA.

Sounds like you did an internship at a PE firm while in school. This doesn't hurt and different shops will have different viewpoints on it, but I don't think it is tremendously helpful. You can't seen an entire deal cycle in three months. In fact, PE is much longer term than banking and has many more elements to it. Here is what I mean:

In PE (at least the leveraged buyouts world), I put transaction experience into four different groups.
1) Acquisition of a Platform Company
2) Acquisition + Integration of an Add-on Company
3) Refinance of a Platform Company
4) Sale of a Platform Company

Each of these are unique experiences, and this doesn't even include anything related to company monitoring (such as board meetings, strategic planning meetings, etc.). In my opinion, the "holy grail" of PE experience includes having exposure to all four of these events. You'll never get that experience through an internship -- and some people won't even see all four events during their 2/3 year pre-MBA stint.

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Apr 14, 2012

In regards to my previous internship it was at an ib boutique, but there was no deal flow going through (unpaid) and also I was a freshman so I didn't know much about Ibanking. The MD took this time to pretty much teach me the ins and outs of IB (how to model/different valuations etc.) It was a good and bad experience in that I learned a lot but it wasn't an actual IB experience, but what do I say to the interviewers about this experience because it was more of a learning opportunity than a hands on deal opportunity? Do they just want to see I worked/learned something during the summer?

This is extremely common. As a freshman, even having someone show you the in's and out's of banking will put you FAR ahead of the curve compared to your buddies working retail or misc internships. You wouldn't be expected to have worked on any deals during this internship. Obviously you'll want to position the internship on your resume in the best light possible, but you definitely will not be expected to have done anything beyond fetch coffee as a freshman. To the extent you can demonstrate that you learned valuable, IB related knowledge/skills, that would be a huge plus going into your next internship cycle.

Apr 14, 2012

I have an interview coming up with a boutique investment bank and I was wondering how I can respond to questions such as why I would want to work with them over any other bank (and over any other boutique).

The reality is that if you don't have any inside connection to the bank, you won't have any unique way to answer this question. Almost all applicants respond with some combination of (1) lean deal teams / senior level exposure, (2) increased responsibilities, and (3) interest in whichever "niche" that bank serves. Don't try to use this question to differentiate yourself unless you truly have an angle -- just answer with the canned response and move on. This is one of those questions where it is unlikely to score you points, but very likely to ding you if you give the wrong answer. For example, I worked at a MM bank doing exclusively M&A. When candidates told me they were "really interested in the markets," this demonstrated that they lacked an understanding of what was involved in the analyst role at my company. That's a huge negative...

Apr 14, 2012

What are your thoughts on PE positions that involve "cold calling"?

Any shop that says that you'll be working on "origination" pretty much means you'll be cold calling. Generally, this is the majority of what you'll be doing. Unless you manage to source a transaction, don't anticipate getting much transaction experience.

That said, cold-calling is considered "legitimate" PE experience by most PE shops. If you work at the likes of Summit Partners, TA Associates, or other growth equity oriented cold-calling shops, you can generally exit to the top B-Schools or other strong PE shops. As a result, I think it ends up being a personal determination if working at a cold-calling shop is an attractive way to spend your pre-MBA PE years.

At the PE shops that I've mentioned, cold-calling is considered a function that is performed by investment professionals. The analysts/associates who do the cold-calling are also typically doing the investment work, so they are one and the same. As a result, this experience would immediately qualify you for a position where you were no longer cold-calling and started doing exclusively investing. People interviewing for cold-calling roles need to ask themselves: Is the job exclusively cold-calling, or are you the one who executes the transactions that you source? If it is the latter, you will be in a position to lateral to an investing role. If it is the former, you'll have a much greater challenge, although certainly not impossible.

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Apr 14, 2012

Given my entrepreneurial spirit, should I try to find a job in PE immediately after graduation?

There is very limited downside to obtaining a job in PE right out of undergrad. While Investment Banking or Management Consulting is a more typical path, jumping straight to Private Equity can be very appealing. The one thing I'd note is that entrepreneurial spirit is generally NOT an attribute you see in many Private Equity professionals. Entrepreneurism is typically associated with Venture Capital. I'd suggest you also look into VC. That said -- it is incredibly difficult to get a job in VC out of college.

A couple of other posters have mentioned that financial modeling is being outsourced at some PE firms. Can you confirm this? Also, given that some of the works analysts do at PE firms is fundraising- does this make it more possible to jump straight into PE out of undergrad.

I disagree that financial modeling is being outsourced at some PE firms. I have yet to see this or hear any evidence that this is the case. Also, when you say that "some of the work analysts do at PE firms is fundraising" ... it is important to realize that the fundraising work that an analyst does at a PE firm typically involves pulling together powerpoint presentations and memos. It is the same type of work that is done at consulting firms and banking. The work is not transaction related and definitely not the type of thing you want to focus on in Private Equity.

My last and final question would be- how fungible are the skills/general knowledge gained by working as an analyst in PE for entrepreneurship?

I'd say that PE gives you very strong general business skills. You'll learn what makes a business strong as well as how to measure performance. What you won't learn is how to OPERATE a business, which is far more challenging and quite honestly, far more important. In the grand scheme of things, there are few jobs that will build your entrepreneurship skills better than Private Equity at the junior levels. However, I'd argue that the only way to truly learn how to run a business is to go out and start one.

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Apr 14, 2012

I am currently targeting boutique IBs in my city and am cold-calling them my resume with a condensed version of my CL in the body of the e-mail. I was wondering how long I should wait before following up if there is no response and if it is even worth to do so.

Generally, I would wait somewhere between 1-2 weeks before following up. If you aren't having any luck connecting via email, don't be afraid to follow up with a phone call. If the person has been putting off responding to you, this can provide you with an "immediate response." You may be afraid that this strategy is too pushy, but if the person wasn't going to respond to your email, that is pretty much the same as being rejected. Sometimes being a little pushy/annoying can help.

Also to keep my options open I wanted to know what other positions I can look at aside banking where I can do the type of work I love: I am mainly interested in valuation/financial analysis/modeling, being an industry expert and being aware of the prevalent trends of that industry. I know that corporate/commercial banking does this for lending/analyzing risk/etc but are there are any other industries I should be looking at so I can have relevant experience this summer in case the boutiques do not respond?

Don't be afraid to look into corporate development positions at Fortune 500 companies. While financiers pretend to have a deep understanding of trends in industries, the reality is that they never do more than scratch the surface. To really master an industry and understand the strategy of all the key players, you really need to work IN the industry. There is also a fair share of modeling and valuation that goes on in Fortune 500s, although not nearly to the degree of banking. If you have a few industries that you find attractive, go ahead and apply to their business or corporate development groups.

Apr 14, 2012

I'm a non-target undergrad with a few PE internships but I still have no idea what i'm doing sometimes. I've been getting nailed hard during interviews since I have good experience on paper, but I don't have much to say because I was a 'lazy' intern, referencing your post above about 'lazy analysts' who don't take the extra step to understand things completely.

How did you prepare for PE interviews? Are PE case interviews similar to consulting case interviews but with a modeling test? What kind of technical PE questions do you get that aren't asked during the ib interview process.

It seems a PE technical guide doesn't exist yet.

It is hard for me to comment on what you'll be asked coming directly out of undergrad as I didn't interview for PE jobs until I had IB experience. That said, I would suspect that many of the PE questions asked of an undergrad will overlap with IB questions, so you'll definitely want to start there. Unfortunately the amount of knowledge you're expected to have going into PE is a bit more diverse than it is in IB. To the extent PE questions differ from IB questions, it will be largely based on "equity and returns" related questions. Make sure you know how to calculate IRRs + Cash-on-Cash multiples. Know about different tranches of debt and equity (senior/mezz debt, preferred/common/restricted equity). Understand the different ways to generate equity value in an investment (multiple arbitrage, EBITDA growth, debt paydown, etc.).

Regarding the case interviews, expect to be given a theoretical investment opportunity to analyze. Basically, you'll want to do a SWOT analysis or something similar. I don't know many PE firms that utilize the consulting case study method of "How many ping pong balls will fit inside a 747," which is more of a marketing sizing exercise than a test of strategic thinking.

As for a PE technical interview guide -- I believe WSO may have one in process.

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Apr 15, 2012

What's a good reason as to why you stayed a third year?

As a point of clarification, I didn't personally stay a third year, although I was prepared to in the event I didn't land a PE job.

There are a few reasons why it can make sense to do a third year:

1) Insufficient deal experience. In the long run, you only get credit for work you've done on transactions that closed. Through the course of your analyst stint, you may get very unlucky and have all the deals that you got staffed on blow up for reasons completely beyond your control. If you're approaching the two year mark and don't have any closed transactions, you may want to consider sticking around for a third year to ensure you get a few on your resume.
2) If you were unsuccessful in recruiting, sticking around a third year for another shot can make a difference. You'll likely have plenty of additional experience during recruiting, which will make you a more attractive candidate. Also, it will give you a chance to apply to a broader set of jobs if your initial search didn't end up working out for you. While many people who struggle the first go-around also struggle the second go-around, some people are able to successfully do it.
3) Other. There are a thousand of other, situation-specific reasons to stick out a third year. Maybe your girlfriend has one more year of college left and you don't want to move to a new city without her. Maybe you actually enjoy the work (okay .. unlikely here). Maybe you need the cash from an extra year of banking to pay off student loans or to start your own business. I've seen all of the above and more...

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Apr 15, 2012

How is MM PE recruiting for bankers coming from not as well known MM firms? Places more in the 50-100 banker range as opposed to Blair, HW, etc.

I think that MM PE recruiting largely falls off a cliff once you move out of the top-tier MM range. Top tier MM would include places such as William Blair, HW, Baird, Lazard MM, Houlihan Lokey, Lincoln International, etc. If you're at a lesser MM, you'll need something more than your bank name to get you in the door. This could be networking/relationships, exceptional deal experience, great academic background, or any number of other things. Expect it to be an uphill battle if you lack these things.

Apr 15, 2012

What were the interviews like when you were searching for your senior associate position? What did the interviews focused on?

I also had two years of IB and two years of PE experience under my belt when I was interviewing. My interviews were primarily focused on how the deal process compared between my existing PE shop and my prospective employer's PE shop. I spent a considerable amount of time explaining the process, including my individual responsibilities. Outside of that, I was asked to review a deal where I read the CIM, typed-up and presented a few pages of my thoughts, and built a financial model. I also took a written accounting test and went through a number of "fit" interviews. Overall, it was incredibly similar to the pre-MBA interviews I had to go through, the obvious exception being the overview of my PE job.

Apr 15, 2012

Would extending my PE internship be my best option or should I look at PWM or something else? What do you think of an IB internship in the fall? It would start a few weeks before FT recruiting, allowing me to at least put something on my resume.

I think extending your PE internship would be infinitely more valuable than a PWM internship. The key is to get as much directly relevant experience as possible and PE is far more relevant than PWM. Regarding a fall IB internship, that is exactly what I did personally to get my foot in the door. While working in IB during the school year can be brutal, it can definitely help you stand out even if you are only a few weeks into it come the start of recruiting. For whatever reason, recruiters have a tendency to ignore the dates section of resumes and only focus on the work experience / content. This could be very helpful in a situation such as yours.

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Apr 21, 2012
Apr 21, 2012