Non-Lifer Investment Banking thoughts wanted - IBD to MBB, an improvement?

Hi All,

I am currently a post MBA IBD Associate at a bulge bracket bank (1.5 years now). I recently got an offer from a top MBB (Mck/BCG). I am trying to figure out if the move is in my best interests and was hoping for some thoughts.

Ideally, *i think *my next step would have been PE, but since I am a non-traditional post MBA associate, the entry is tough and I don't know anyone that has done it successfully yet. I like the idea of PE because of the ability to "own" and operationally improve a company. I think that would fit my interest in the valuation / operations of a company.

My thinking with MBB, is that it might be a better route into PE - with a combination of IBD finance experience + MBB strategy. In addition, it might allow for a path into just the PE operations side which also might be something I would like to consider.

I feel that in the 1.5 years in banking I've gotten some good experiences, and the path forward seems uncertain (although more lucrative than MBB). I also think MBB might provide the same and potentially more, exit opportunities vs. IBD.

Question I'm asking is how should I think about the move - should I make the jump into MBB or stick with IBD. I know I do not want to be a lifelong banker nor lifelong consultant - I am just trying to see what else is out there that I can really be passionate about and make into a career.

Any thoughts appreciated - thanks!

 

McKinsey has good PE exit ops. BCG does not.

If you are doing BB IBD and want to go PE, stick with IBD. It makes 0 sense to jump to MBB if you are working at a good BB. Just focus on killing it at your job, give yourself another 6-12 months, get in contact with head hunters and make the jump to PE.

The only time I would tell someone to go MBB instead of BB if they want PE is: -They are at a lower BB (UBS, Deutsche, etc) -They absolutely hate IBD

My background: Recruiting for both IBD and MBB out of undergrad with focus on PE exits. In my situation IBD is top MM but not BB so MBB is a better option.

 

hi - yes, i tried the same. offer explodes Oct '17. Which will be ~1.25 years at IBD. However, in the year at IBD, I got a full IPO, 3 M&A deals, and some debt experience under my belt.

I struggled with the same question - but have a hard time ascribing the incremental value of a few months.

do you agree with my IBD + McK background for a better move into PE (considering i am a post MBA IBD associate). It seems that post MBA associate will get a Non- NYC, MM PE gig.

I can achieve the same with IBD + McK, i think ? And maybe get something better with McK ? thoughts?

Thank you

 

If the bonus coming early next year doesn't mean anything to you, then there's not much incremental value. But leaving that quickly may signal to PE firms that you didn't like doing deals or weren't good at it. I'm pretty sure McK would open doors. B/B may not do as much to help transition to PE. BTW, what makes you "non-traditional"

 
Best Response

You should also think about if it's worth going into PE after 3-4 years of post-MBA experience. It's unlikely you get into a very well known PE fund (I'm including well-known PE firms that focus on MM and LMM, not just MFs) given your non-traditional background. That means if you do exit into PE, you'll likely be taking a lower title (some kind of interim step before VP where you're supposedly on the partner track), which will mean less pay (base and bonus). Assuming you end up making the leap into the coveted "partner track", you're still going to be making less salary than had you stayed in banking, and you won't see significant carry dollars until much, much farther down the line. You don't really see any carry dollars until 4+ years from when you first receive it - keep in mind that funds need to hit a hurdle rate before receiving their 20% of profits, exits are staggered throughout the years, and real carry dollars is when you have carry in multiple funds (not small bps in one fund).

I'd also note that lifestyle in PE isn't necessarily better. It varies quite a bit depending on fund strategy, size, and people, but the VPs I know in PE work harder than the VPs I knew in banking. There are also instances of the reverse, but my point is PE does not automatically equate to better lifestyle. Plus you'd be joining as the new guy with no PE experience at all, you won't know how to run diligence processes, what to look for, negotiate legal docs, etc. To some people, working really really hard in your 30s (just taking a guess at your age) is totally fine, but most post-MBAs I know also have family considerations that make grinding out at a relatively junior level to be much more challenging (and I do consider a new VP in PE at the junior level).

The whole being "operationally focused" bent is pretty exaggerated. You might have some tangential experience coming from a MBB, but the reality is most PE funds have operating partners that were former CEOs and have actually built businesses doing anything important operationally. You might run some financial analysis on a potential project, or review and give your thoughts on what some third-party consultant recommended, but you're not really operationally involved.

I'm not saying you should stay in IB necessarily. But I do think it's important to consider multiple aspects of exiting into PE as a post-MBA because it's a different conversation than pre-MBA.

 

This is really good advice that many people don't consider -- the true earnings difference between IB and PE really doesn't come into play until you get carry and that is not only down the line but also is a large function of your fund. As a post MBA associate with no analyst modeling experience, realistically you are going to be at a smaller fund, where pay ops are less, especially at the lower level. For analysts, who are going to work hard in their post analyst years no matter what, and have a chance at a well known fund / partner track the value proposition is a lot different. In IB, VP is when the lifestyle starts getting better (stress may be higher though)--starting at the bottom of the tottem pole at PE is something that should be considered.

I'd also note, as someone having done consulting, I think the consulting lifestyle is even harder than banking. You still work after 9pm consistently and are often out of town so it doesn't even matter if you get done early. In banking I can still grab a beer with friends around 10pm. Frankly as a senior associate, I work less now than my friends in consulting.

I'd also note that for every pitch book you do that seems to gain no traction in banking, you have similar experiences in consulting. You often do great analysis but then have no idea if it was even used or implemented. Often you are hired just so an executive can cover their ass / justify the course of action the'd like to take. It can be as disheartening as banking.

 

Some of you all need to keep in mind that "PE" isn't "PE" anymore than working in IBD, Credit, Trading, and PWM are all "Finance".

There is a massive difference in terms of the day to day work between what people typically get hired into those companies to do. If you're from a finance background PE companies are most frequently hiring you to perform deal sourcing and analysis. If you're from a consulting or ops background you'll probably be hired to operate or improve portfolio companies.

 

If you want to do PE, either operational or deal team, Bain is your best bet. After that McKinsey also places well. They also open up a variety of different exit opps if you change your mind. People also regularly state that the strategic thinking they learned at MBB helps them make better decisions and understand companies better than most bankers; although bankers are better at modeling. If you have both you should be a strong candidate.

 

I would take the offer in your shoes but I have my reasons.

1) No one turns down a McKinsey offer. and it would not be a company that I want to piss off. 2) McK will offer even more diverse exit ops than PE. Especially if being in the C-Suite in Industry appeals to you at all

EDIT: By "no one", I was being facetious. Should have said that most people work their whole lives dream to get a McKinsey offer and don't get one. And since you applied there must be some part of you that is interested in the role. I am saying that the role has a lot of value to add to your career and was merely providing the best argument I could as to why you should accept.

 

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