Chances for top PE gig are better coming from M/B/B

alcman's picture
Rank: Senior Monkey | 79

Hi,

I figured that doing your 2-year stint at McK/BCG/Bain might actually give you BETTER chances of landing an associate gig at the top LBO funds than working at GS/MS IBD. My calculation is this:

Top LBO funds bifurcate their hiring process - they hire bankers and consultants in separate processes, and let's say they reserve about 70% of their associate class for ex-bankers and the rest for ex-consultants.

Now, although there are hence more than 2 times as many spots in the associate class for bankers than for consultants, the competition on the banking side, I would argue, is more than 2 times as intense than the competition on the M/B/B/ side, because (1) there are many more analyst at I-banks than there are analysts at McK/BCG/Bain, and (2) the proportion of analysts that aim to enter PE is much larger than at I-Banks than at consulting firms.

Hence, statistically, you stand a better shot of landing at BStone/Carlyle/TPG etc. having worked at M/B/B for two years.

Anyone care to comment whether this makes sense at all?

Comments (31)

May 14, 2008

I agree. I am working at McKinsey/Bain next year based on a similar (more detailed) calculation.

About 30-35/150 guys at AC/BA level for each go to buyside (after 2-3 years). The rest are largely uninterested (stay at Mc/Bain; go into industry; go to b-school; go to other grad school; etc.). Fewer guys come from BCG (let's assume 20). MBB are on a totally different level than others--it's like GS vs. BofA, not like GS vs. say Citi when you compare McK with Monitor, for e.g. Total consultants with a realistic shot = ~80-90.

If every banking class is about 150 ppl, and let's just assume that 5 bank (say GS/MS/Leh/JPM/Citi) get all the spots for bankers, and 50% of their class wants PE: Total bankers with a realistic shot = 375.

Let's look at the top-5 firms: BX/KKR/Carlyle/Baincap/TPG. I know that Bain Cap took ~20 guys last year (about 12 accepted the offer)--most were consultants from MBB. I bet the other 4 each took like 2 or 3 consultants.

If people were randomly selected, bankers would get 80% of spots. As it is, incl bain cap (which is every bit as good as the other firms there), consultants seem to do way better; not incl Bain cap, they would be roughly tied (I'm assuming associate classes at BX/KKR/etc. of ~10-12).

Let's put it another way. About 1/3 of Bainies who apply to Bain cap get it (~10 last year got offers-->associate class with 5-6 bainies there; ~30 applied). That doesn't incl acceptances to the other 4 above, other large caps, etc. I doubt that 1/3 of guys from that cohort of banks mentioned who apply to those top 5 firms get even one of those 5, much less BX or KKR, specifically.

I'm of the belief (and I did a lot of due dili before choosing where to work) that Bain and McK are way above BCG in terms of this stuff; that more banks than those top 5 are players (esp when you incl Lazard, BX M&A, etc, alongside Deutsche and CS and ML and the like). So, if anything, my assumptions favor the "banking is better" hypothesis. If you are at McK or Bain, you are prob in better shape than anyone but those in a few very select groups (e.g. GS TMT, which is great, but you have to get placed there after accepting your offer, so sorta random; same for CS sponsors; MS M&A; etc.), in such a way that probability works out in your favor.

May 14, 2008
js08:

I agree. I am working at McKinsey/Bain next year based on a similar (more detailed) calculation.

About 30-35/150 guys at AC/BA level for each go to buyside (after 2-3 years). The rest are largely uninterested (stay at Mc/Bain; go into industry; go to b-school; go to other grad school; etc.). Fewer guys come from BCG (let's assume 20). MBB are on a totally different level than others--it's like GS vs. BofA, not like GS vs. say Citi when you compare McK with Monitor, for e.g. Total consultants with a realistic shot = ~80-90.

If every banking class is about 150 ppl, and let's just assume that 5 bank (say GS/MS/Leh/JPM/Citi) get all the spots for bankers, and 50% of their class wants PE: Total bankers with a realistic shot = 375.

Let's look at the top-5 firms: BX/KKR/Carlyle/Baincap/TPG. I know that Bain Cap took ~20 guys last year (about 12 accepted the offer)--most were consultants from MBB. I bet the other 4 each took like 2 or 3 consultants.

If people were randomly selected, bankers would get 80% of spots. As it is, incl bain cap (which is every bit as good as the other firms there), consultants seem to do way better; not incl Bain cap, they would be roughly tied (I'm assuming associate classes at BX/KKR/etc. of ~10-12).

Let's put it another way. About 1/3 of Bainies who apply to Bain cap get it (~10 last year got offers-->associate class with 5-6 bainies there; ~30 applied). That doesn't incl acceptances to the other 4 above, other large caps, etc. I doubt that 1/3 of guys from that cohort of banks mentioned who apply to those top 5 firms get even one of those 5, much less BX or KKR, specifically.

I'm of the belief (and I did a lot of due dili before choosing where to work) that Bain and McK are way above BCG in terms of this stuff; that more banks than those top 5 are players (esp when you incl Lazard, BX M&A, etc, alongside Deutsche and CS and ML and the like). So, if anything, my assumptions favor the "banking is better" hypothesis. If you are at McK or Bain, you are prob in better shape than anyone but those in a few very select groups (e.g. GS TMT, which is great, but you have to get placed there after accepting your offer, so sorta random; same for CS sponsors; MS M&A; etc.), in such a way that probability works out in your favor.

two things:

a) i think you're underestimating the number of people from consulting who want to go into PE. more want it every year, especially from the top places

b) you're overestimating the number of people the top firms take each year and definitely the number of consultants they take each year. it's nowhere near the numbers you've posted. i know that.

also, i think 20 for bain cap is pretty high.

May 14, 2008

That sounds very interesting and it does make sense to me. I am also pondering right now on whether I should do 2 years of consulting or banking.

I can't say for sure if what you have written is true, but at least it makes sense

May 14, 2008
alcman:

Anyone care to comment whether this makes sense at all?

No, it doesn't.

To the other poster; when you have to write a 5 page report on why consulting gives you better ops, you know that you're just rationalizing for why you went into consulting.

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May 14, 2008

This sort of math and/or rationalization may work for the top funds, which take large classes of pre-MBAs and "reserve" some spots for consultants - although I'm not sure that this is the case at all. I doubt that, for example, if Blackstone wanted 12 associates, that if there were 12 banking candidates that were much more qualified than any of the consulting candidates, that they would dismiss 30% just to fill their quota of consultants. In fact, I'm positive this isn't the case. Blackstone would simply take the 12 best candidates.

Do consultants get more slack when it comes to technical modeling questions? Of course. Are there other ways to keep them on an even keel with the bankers in the interview process? Absolutely.

The other thing you're considering that if PE is your goal, not every banker is aiming for the top funds like some of the consultants may be forced to focus somewhat on (the shops that tend to take consultants are generally bigger in nature, if not mega-funds). I know I personally had no interest in mega-funds and chose to recruit solely upper middle market. This fact in itself decreases the pool of interested banking candidates - does it really make a difference in the end? I don't know, probably not.

The final point is that if PE is your goal in GENERAL, not just mega-funds, banking is far and away your best bet. Many second tier and smaller funds don't recruit consultants. My firm doesn't. Even some mega-funds don't (i.e. Madison Dearborn - they may give interviews but they haven't hired any). So while your math may work for mega-funds, if PE is your goal the broad spectrum of opportunities to bankers are much greater.

May 14, 2008

KKR didn't take consultants until very recently and Blackstone only has a few, that is, not 2-3 per class. know this first-hand since i know a straight from undergrad kid working there.

May 14, 2008

bifurcate?

May 14, 2008
May 14, 2008

This makes perfect sense, just like the guy who gets into Harvard, but decides to go to SMU cuz obviously it's easier to get a banking job at SMU where there's less competition for banking jobs.

Oh wait...

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Aug 14, 2019

A better comparison would be Harvard/Wharton vs Stanford. Both GS and McKinsey are super prestigious, it's just one has more people targeting PE.

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May 14, 2008

Check out the website for Highfields capital. That is a single hedge fund which, on its own, has 2 guys who did McK-->BX-->Highfields. In the last few years. I personally know two ex McK guys who are now at BX. That's ~1 guy from McK per year that I either know of that works at a (single, small) hedge fund. I don't know that many guys in finance at the associate level; and definitely imagine that EVERY guy who does consulting --> BX does not go to Highfields Capital. It doesn't seem so unreasonable that 2 consultants per year at BX are from consulting. Same for KKR (I met 2 people from Bain who had offers there; know of one other--and those are through acquaintances, not through Bain/Mck's recruiting dept). I know one guy from McK who got TPG in the past year, and he said he met two other consultants with offers (and heard there was one more). Carlyle doesn't really get many consultants (I met guys from Bain/McK who got offers there--the bar at Carlyle is reasonably high from consulting, and those guys seemed to prefer Bain Cap, or Berkshire in one case). My "2-3" prediction for BX/KKR/Carlyle/TPG might be a bit off, but based on all of this, I feel like I can personally "account for" a 2 / year figure. As for Bain Cap--those numbers come from a conversation with an MD there (one whose name has been in WSJ several times in the past 6 mos). Bain Cap hires a few more associates than others b/c of its greater due dili approach, so 12 is not at all unreasonable. Not all of the 20 they hired were MBB consultants, but the majority were. It's not a ridiculous figure at all, either, considering the backgrounds of their VPs/MDs. Guys who turned down Bain Cap have turned it down for (top) MM PE; VC; a startup; and KKR/TPG in the past couple of years. The "offer conversion" rate isn't so ridiculous either. As for the "higher interest in PE" from consulting comment...Bain cap received just under 30 apps from Bain & Co for associate spots last year--and that would be the most obvious place to apply in PE for Bain guys--so I imagine my figures are accurate. Interestingly enough, moving from Bain/McK to hedge funds has become more common (though not as easy as in banking for most places)--maybe that's where the "excess" people are going?

Try another thought exercise. Assume that Bain Cap/KKR/BX/TPG/Carlyle each hire 10 associates (this isn't true--Bain hires more; and their offer conversion rate tends to be a bit lower). Assume that Bain hires only consultants, and the latter 4 only bankers. Even under these (inaccurate) assumptions, the ratio of offers would put MBB consultants on an even keel with bankers among those firms.

As for MM: it's true that there are MMs that hire more bankers. That's not really a knock against where consultants from MBB can go. After all, those 350 bankers would need a bunch more places to go than the 80 consultants. I would argue that between Audax, Berkshire, GG, Lee Equity, HIG Capital, and a number of smaller places (I was just reading about this shop called TSG consumer partners that has 60% returns over the last decade+ and has a $1.5 bn fund; there is a hedge fund in NY called BlueMountain Capital founded by some McK guys that hires a fair number of consultants; check out the website for Sageview Capital, which is the hedge fund founded by the two former "heirs apparent" to KKR--they have more associates from consulting background than banking, as an absolute number; Sankaty Advisors, which is Bain Cap's debt fund and has mostly consultant-background VPs--check out their website--and is one of the best debt funds out there; you've probably never heard of SPO partners, but it's a really successful San Francisco fund--50s% returns for a decade+--that has taken a lot of associated from McK and Bain before). I don't know any consultants from the NY/Bos/SF offices of Mck/Bain who wanted to, prepared to, and couldn't land a gig at one of the above places, or one of similar calibur. That's great that bankers have access to more MM funds, I guess, but McK and Bain have access to top MM funds at enough of a level that landing gigs in that space doesn't appear to represent a significant limitation to BAs/ACs. I'm not basing this on recruiting conversations--I'm basing this on placement data that I was able to see from both firms.

As for the "5 page report" criticism: I would argue that it is a strength to be able to justify a decision with logic/data rather than simply assuming the "banking is better" view is accurate without any real reasoning. Suffice it to say that I had options that you probably would've taken over Bain/McKinsey, but I think I made the right choice, and had access to more datapoints than maybe the avg applicant because of the places I was choosing between. Unlike you, perhaps I have "5 pages worth of data" to work with?"

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Funniest
May 15, 2008
js08:

Check out the website for Highfields capital. That is a single hedge fund which, on its own, has 2 guys who did McK-->BX-->Highfields. In the last few years. I personally know two ex McK guys who are now at BX. That's ~1 guy from McK per year that I either know of that works at a (single, small) hedge fund. I don't know that many guys in finance at the associate level; and definitely imagine that EVERY guy who does consulting --> BX does not go to Highfields Capital. It doesn't seem so unreasonable that 2 consultants per year at BX are from consulting. Same for KKR (I met 2 people from Bain who had offers there; know of one other--and those are through acquaintances, not through Bain/Mck's recruiting dept). I know one guy from McK who got TPG in the past year, and he said he met two other consultants with offers (and heard there was one more). Carlyle doesn't really get many consultants (I met guys from Bain/McK who got offers there--the bar at Carlyle is reasonably high from consulting, and those guys seemed to prefer Bain Cap, or Berkshire in one case). My "2-3" prediction for BX/KKR/Carlyle/TPG might be a bit off, but based on all of this, I feel like I can personally "account for" a 2 / year figure. As for Bain Cap--those numbers come from a conversation with an MD there (one whose name has been in WSJ several times in the past 6 mos). Bain Cap hires a few more associates than others b/c of its greater due dili approach, so 12 is not at all unreasonable. Not all of the 20 they hired were MBB consultants, but the majority were. It's not a ridiculous figure at all, either, considering the backgrounds of their VPs/MDs. Guys who turned down Bain Cap have turned it down for (top) MM PE; VC; a startup; and KKR/TPG in the past couple of years. The "offer conversion" rate isn't so ridiculous either. As for the "higher interest in PE" from consulting comment...Bain cap received just under 30 apps from Bain & Co for associate spots last year--and that would be the most obvious place to apply in PE for Bain guys--so I imagine my figures are accurate. Interestingly enough, moving from Bain/McK to hedge funds has become more common (though not as easy as in banking for most places)--maybe that's where the "excess" people are going?

Try another thought exercise. Assume that Bain Cap/KKR/BX/TPG/Carlyle each hire 10 associates (this isn't true--Bain hires more; and their offer conversion rate tends to be a bit lower). Assume that Bain hires only consultants, and the latter 4 only bankers. Even under these (inaccurate) assumptions, the ratio of offers would put MBB consultants on an even keel with bankers among those firms.

As for MM: it's true that there are MMs that hire more bankers. That's not really a knock against where consultants from MBB can go. After all, those 350 bankers would need a bunch more places to go than the 80 consultants. I would argue that between Audax, Berkshire, GG, Lee Equity, HIG Capital, and a number of smaller places (I was just reading about this shop called TSG consumer partners that has 60% returns over the last decade+ and has a $1.5 bn fund; there is a hedge fund in NY called BlueMountain Capital founded by some McK guys that hires a fair number of consultants; check out the website for Sageview Capital, which is the hedge fund founded by the two former "heirs apparent" to KKR--they have more associates from consulting background than banking, as an absolute number; Sankaty Advisors, which is Bain Cap's debt fund and has mostly consultant-background VPs--check out their website--and is one of the best debt funds out there; you've probably never heard of SPO partners, but it's a really successful San Francisco fund--50s% returns for a decade+--that has taken a lot of associated from McK and Bain before). I don't know any consultants from the NY/Bos/SF offices of Mck/Bain who wanted to, prepared to, and couldn't land a gig at one of the above places, or one of similar calibur. That's great that bankers have access to more MM funds, I guess, but McK and Bain have access to top MM funds at enough of a level that landing gigs in that space doesn't appear to represent a significant limitation to BAs/ACs. I'm not basing this on recruiting conversations--I'm basing this on placement data that I was able to see from both firms.

As for the "5 page report" criticism: I would argue that it is a strength to be able to justify a decision with logic/data rather than simply assuming the "banking is better" view is accurate without any real reasoning. Suffice it to say that I had options that you probably would've taken over Bain/McKinsey, but I think I made the right choice, and had access to more datapoints than maybe the avg applicant because of the places I was choosing between. Unlike you, perhaps I have "5 pages worth of data" to work with?"

I can tell you this: With the ability to make up as many statistics as you do and rationalize in this many useless words, you will certainly be an all-star consultant. You have made the correct choice.

Either you sling crack rock or you got a wicked jump shot

Either you sling crack rock or you got a wicked jump shot

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May 14, 2008

I'm going to MBB and I think BB IB is better for most if you want to go into large-cap PE, but McK and Bain do give their consultants ample opportunity to learn and gain resume experience great for PE.

McKinsey and Bain both have corporate finance and private equity focused studies which they give to BA's basically on demand, which lets them get experience in the area. They have lots of modeling courses. In recent years McKinsey and Bain both have upped their PE focus (I've heard Bain moreso) but you have the opportunity to gain a lot of skills helpful with restructuring portfolio companies and working on strategies and so on. Basically I think consulting gives you the qualitative skills that bankers don't have, but you have to work extra-hard to get the modeling skills which bankers do have.

Also, at McK in particular (and to a degree Bain), analysts have more opportunity to take charge of the relationship with a client and take on a larger amount of responsibility than a BB IB analyst who works with smaller parts of a transaction. However, again this goes both ways. It depends a lot on what group in IB you are in versus what sorts of studies you were in at MBB. At MBB, you can rotate between a lot of fields which is also a plus on the resume.

Of course, I chose MBB over a not-super group at a not-GS bank, though it was arguably a top 4 bank. If it was GS M and A then maybe MBB would have been harder to choose. Who knows. Disclaimer: I asked around about PE its still a long way off and I still have a lot to learn.

May 14, 2008

To be sure, I don't have a lot of friends in consulting so I don't know what kind of interest level there is within MBB in PE. If you're arguing that interest level is relatively low and therefore makes these positions less competitive relative to your MBB peers, then that may very well be the case, I don't know. I would take a look around and try and see what percentage of your peers at MBB wanted PE, and got it.

Not as many analysts in banking want PE as you might think. Out of the analysts that I know that were recruiting for PE, basically everyone got what they wanted. I know maybe 3 analysts firsthand that wanted PE and didn't end up with a job. Now, I don't have enough hard info to say definitively that this % of analysts wanted large funds and couldn't land them, or anything like that, but all I can tell you is that out of the people that I know of that were interested in PE, 90% or more were able to get jobs in PE. But then again, we were a part of the frothiest job market out there. I have no idea what a downturn in hiring would do to either. I will agree that more and more of the bigger funds are recruiting consultants, and I think with good reason. Consulting kids are just as smart as the banking kids and often bring a different perspective, if not completely relevant deal experience. But just based on what I know, I'd say if PE in general is what you want, I'd still contend that banking is the safer bet. For mega-funds (and it's debatable how many people want mega to begin with) it might be a different story.

The only way you can run your numbers as it pertains to mega funds is by trying to count how many kids were interested in mega funds in the first place (you can't count the entire banking analyst universe on that one).

I also think you're underestimating just how many MM funds there are between, say, 500mm and 4bn. Just do a quick and dirty CapIQ run and it should give you a general idea.

May 14, 2008

i'd agree that your odds of getting to PE in general are better coming out of a decent banking group than M/B/B. your numbers are definitely off for bain cap (20 is definitely too high) and it gets even harder to find a spot at the other megas. you'll never have doors closed to you if you're a banker, but there are definitely funds that don't hire consultants at all. to reiterate gametheory, if your goal is private equity, banking is the surest route there

that being said, M/B/B is still a great opportunity if you're not sure what you want to do and are open to PE. some great funds recruit primarily consultants (Bain Cap, Golden Gate, Berkshire, Audax), and i don't know of any colleagues of mine at M/B/B who didn't get a job in PE if they were at all interested. the competition is still much less intense at M/B/B, but it's quickly becoming a more popular exit.

from the perspective of someone at M/B/B who turned down a top banking group (js08, some of these groups can actually place you before you accept), there were definitely times in the PE recruiting process this year where i felt i would've been better positioned as a banker. if it weren't for a finance background and previous banking experience, i don't think i would've received the same looks that i did... just because you're a consultant, doesn't mean you won't get the same LBO modeling case study and the same valuation questions. there's greater room for error, but you still need to understand the mechanics. on the other hand, i felt i had a significant advantage speaking to the highlights and risks when discussing potential targets and investments.

there are obviously merits to both banking and consulting... in banking, you're developing "hard skills" crucial to some sort of future in PE -- which is why you get the tough technical questions in the interviews. in consulting, the onus is on you to develop an interest in investing and to hone your softer skills by constantly thinking about investments from a PE perspective. furthermore, if you're primarily interested in megafunds, you have to be proactive about thinking about finance and learning some of the hard skills that bankers already have.

it's an uphill battle to get to a megafund no matter where you are. you'll have opportunities to make it to PE in general whether you're at a good bank or M/B/B... banking/consulting are pretty different routes, so you should figure out what it is you'd like to spend your time doing/learning in the next 2 years and stick with it. hope this helps.

May 14, 2008

20 offers and 12 acceptances may be right (note that this is probably on a rolling basis... hiring occurs only for the number of spots available at a given time -- in other words, the 8 rejects extended the recruiting process for bain cap and necessitated more interviews and the 8 other offers). it's better to think about this as if there were only 12 spots at bain cap...

May 15, 2008

At the end of the day, the best candidates get the jobs, theres no quotas, no targeted number of bankers or consultants. Your decision should be simple, and if you want to do PE you should answer one question. Is this job going to get me an interview, if the answer is yes, you just have to deliver.

I'm at a tier one PE firm (think KKR, TPG, Blackstone)and m most consultants in my firm that get offers are post MBAs who worked at Bain Capital before,and my friends at the other top places (other than Bain Cap) say the same. Also, undergrads dont realize that bain cap, people wise, is far bigger than the ohter mega funds and take 2/3 - 1/3 consultants vs bankers so most of hte consultants you see post mbas are ex bain cap guys.

May 15, 2008

Lol, you can definitely tell who is a soon-to-be consultant based on all the market sizing exercises they can do.

May 15, 2008

Gotta love the consulting bashing by wanna-be/current banking monkeys...

As an ex-consultant who had a passing interest in PE (and a few interviews), I will say that the issues are different coming from a banking and consulting background. Coming from a consulting background, firms are more likely to ask "Why PE? If you like finance, why didn't you do banking? Have you tried to learn modeling?" You can see where the line of questioning is going.

In general, I agree with js08- if you are at a top firm and you want to do PE it is relatively attainable. You need to do the legwork and be a bit more proactive, but it is very doable. Obviously js08 knows what he (she?) wants and has done the legwork but a lot of consultants do not and just apply because that is what all the other type-As are doing. That self-selection really is the biggest screen whereas for bankers, the screens are mostly out of their control (what group you end up in, for example). I also heard from quite a few PE people that the days of pure financial engineering are over, and operational excellence is what is needed and obviously consultants are much better than bankers at that.

I advocate doing consulting over banking not necessarily because of probability of PE at KKR, but because it is way more flexible and if you decide you want to do something else consulting is a better basis. Most of my banker friends all say that they feel stupider after doing banking while consultants are the opposite.

The bottom line is, if you are smart/motivated enough to go to PE, you will do so regardless of if you are a consultant or a banker. It is useless to ascribe probability because there are so many variables that are unaccounted for, and trying to draw some sort of meaningful conclusion is an exercise in futility.

May 17, 2008

As mentioned, both avenues will get you to the PE promised land if you are pro-active about it.

That said, what no one has mentioned yet is that you should do what you enjoy the most. If you enjoy what you do, you'll be more successful at it. And if you don't, the opposite is true. For me personally I see a big difference in the two job types. Looking back, I would have hated to work at a consulting firm. I'm much too pragmatic and $ driven and less academic/intellectually curious (broad stereo types for banking vs. consulting, but generally true).

May 17, 2008

ideating, what do you do now if youre ex consultant and not in pe (just curious, and im not looking for anythign specific just an industry)

May 17, 2008

ibleedexcel- hate to be a dick, but you have no idea what consulting is about if you say that. Every single thing we did, the question asked was "does this move the needle?" The days of academic curiosity and interest are long gone. Consulting as I see it is about engaging with the CEO/COO/CIO/CFO/rest of the C-suite while banking is about engaging the CFO. Bankers who have some experience with consulting, please correct me.

xqtrack- well, if I am not in PE I am probably in one of the other possible career tracks. "Before I became so fervent about Private Equity, I thoroughly considered all my other career options: hedge funds and VC. "

May 17, 2008

I don't think you're a dick, but if you say so.... jk. My comment was as much about personality types as it is about the day-to-day. I've worked in PE with former McKinsey, Bain, BCG and LEKers, so I have a pretty good idea of what they did and the types of people that work at those places, granted I've never worked there myself.

While there are a handful of cross-over personalities, I believe most bankers are suited for banking and most consultants are suited for consulting. As a ugrad, I interviewed for both and had a very hard time determining which I'd prefer. But looking back now and knowing myself and the industries better, banking was absolutely the right place for me, no question.

The example of "does this move the needle?" is a great one - move the needle for who? - for the client. I would get bored trying to figure out other people's problems. But many consultants it seems find a certain level of intellectual satisfaction out of problem solving. They like to prove to themselves how smart they are (I don't mean this in a negative way). Bankers on the other hand, for better or for worse, are more looking out for themselves--how do we move OUR needle? They care less about being smart or being right and more about the $. (That an aspiring consultant would pass on the higher pay scale of banking helps to prove this difference.)

Another angle is that the average consultant is more likely than the average banker to aspire to eventually being a professor. I've heard this a lot from former consultants and much less so from bankers. I think this says a lot about personality types.

The consultants that aspire to PE have a lot in common with bankers. But that less consultants aspire to PE than do bankers also exemplifies a personality difference.

My main point is that there IS a difference and one would be best advised to figure out where they fit in because that's where they're going to have the most success and eventually lead to greater opportunities. Yes, you can get to PE from either place, but for the next 2 years, are you going to enjoy where you're at or are you going to be an unhappy, under-motivated employee?

May 17, 2008

ibleedexel - I agree with you that MBB consulting is 'academic' in the sense that it does no implementation work, whereas I-banks actually execute. However, while McKinsey's research division might be academic, consultants are focused on changing the bottom line (whereas I-bankers simply observe the bottom line).

PE portfolio companies depend both on financial and operational restructuring to become profitable. By operational restructuring I mean not only making production more efficient, but also locking in market position, increasing marketing, undertaking new ventures, etc. that increases the bottom line. Consultants do that for a living.

May 17, 2008

Fair enough, agree on the personality difference though I do think there is a pretty significant population that are suited for both. Also it is really stupid to choose consulting or banking solely on the chance of getting a PE job...

May 18, 2008

ibleedexcel: while I agree that the personality differences point is probably accurate, the suggestion that IBD analysts are "moving the needle" for themselves (rather than a client, like all us public-service-minded, academically oriented consultants) is somewhat preposterous.

First, creating pitch books, building models, etc., is all a way of trying to convince buy-side and corporate entities that you are able to help "figure out one of their problems"--you want the corporation in question to use your ADVISORY services, and the buyside firm (or corporate acquirer) in question to purchase an asset that you are selling. As a middle man, I don't know what the value proposition of a banker would be besides helping solve client problems, albeit different ones than a consultant would.

Second, if you could tell me how staying in the office until 4 AM working on a pitch book for a deal that your bank won't even get constitutes contributing to your bottom line, I would be quite interested to hear. Just because bankers are not on client site, the suggestion that they are moving some personal bottom line rather than providing a service for a client doesn't resonate well with many banking "horror stories" that do exist.

I agree with your point that individuals should pick which of the two (consulting vs. banking) seems a better option for them, and then do that (exit ops are similar enough that this shouldn't be a deciding factor). But I think that the argument that consultants don't maximize income is also somewhat innacurate. Agreed, in a great mkt, banking analysts will make twice as much as ACs/BAs. Based on placement rates into buy-side, though, it seems like the expected lifetime income for a profit-maximizing individual who starts at Bain/McK, or GS/MS is pretty comparable; and likely better than, say, an analyst at Citi/UBS/ML/LB/etc. I would say that taking an analyst offer at any of those latter four banks represents a decision that, in expected value terms, corresponds with a lower lifetime earnings potential than taking the Bain/McK offer. That's not to say that this should be the driving choice of your decision--what you'll like doing probably should be the key driver--but don't suggest that "passing on the higher pay scale of banking" is necessarily a significant lifetime sacrifice for a consultant...

May 18, 2008

http://wallstreetoasis.com/user/10129
i knew i had heard all this reasoning before somewhere with those kinds of numbers. are you him? why did you change your screenname?

May 18, 2008

according to his posts, js08 is going to m/b/b next year; consulting is already a 2nd year at m/b/b going to a top fund next year

May 19, 2008

I guess I should've cited my sources? I read one of that guy's posts earlier and it motivated some questions I asked. Turns out I had access to some sources that suggested to me that much of what he said could be right...

May 19, 2008
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