Chances of entering PE without banking?

It's possible like you said. One of my friends is a partner at a big 4 firm and he mentioned recently that several of his empolyees have been lured away by regional PE players at salary multiples.

Thanks for your response, Bracketracer

I'm guessing for other professions, they may have to be a bit higherup before they get noticed for PE vs. coming out as an analyst at a bank?

I never did banking. I never even worked in any other industry.

Depends. Big places are hiring right out of college now. Summit Partners, Blackstone, etc. Otherwise, smaller places are very open, provided they have a need of some sort.

Yeah, I'm hearing a lot about how students are landing PE jobs out of college, but I'm just wondering if they bother with analyst from other fields outside of banking. I'll be in something else within an bank's IB division, but it's not your traditional IB groups.

It's really too early to say if I want to go into PE after I've done my 2 years, but I would still like to hear about the chances of it happening from some people on this forum that are in PE now (but weren't IB analysts before).

The trick with PE is that only the biggest firms can afford ex-bankers. Smaller firms with less than a billion under management do not generate enough fees to satisfy huge teams of non-partner ex-bankers. One billion means only 20 million in fees. If each senior member wants to draw down a million per year to live on, you are left with only a little bit to satisfy junior people, pay rent, and run the business.

One billion is quite a large fund. With leverage, that billion can buy, say, 5-8 billion worth of companies, which translates to something like 50 to 80 billion of revenues. There are not many places you can look for 50 billion of revenues.

er, 5-8 billion worth of companies does NOT translate to 80 billion of sales

Thanks Sabrine.

Just to clarify Sabrine - $1 BN in equity does not equate to $8 BN in enterprise value. Unless you're KKR buying Safeway 25 years ago, that's completely insane. Also, since when do PE shops scour the globe for distributors? Last I checked, businesses with high operating leverage and ridiculous working capital requirements weren't exactly the most attractive targets.

Even syndicated debt generally carries covenant restrictions that require equity to be at least 20-25% of total capitalization (i.e., Debt / Equity = 4-5x max).

Also Sabrina, please refrain from confusing readers by lumping telemarketers who dial for dollars (i.e., Summit Partners) with legitimate LBO funds (i.e., Blackstone)

I was speaking of $8 billion in revenue, not enterprise value.

Summit/TA have their junior people cold call. (Summit/TA are essentially the same guys, by the way).

Smaller shops get youngsters involved in everything, which includes sourcing deals.