Consulting to PE: Portfolio Teams

Nudge's picture
Rank: Senior Chimp | 20

Hi all, first time poster. Joining a strategy house/DD specialist in London (think LEK/EY-P/S&/OC&C) entry-level, with half an eye on transitioning to PE later in career.

Context

Having networked (+ desktop research + WSO trawling) I'm aware the main pool for PE is IB and that consulting as entry point is limited, but that of consulting firms you're perhaps better placed for that transition where you're staffed on a number of DDs/transactional projects (notwithstanding the obvious advantage of being at MBB instead).

However I'm not under any illusions as to how difficult it is to get into PE even from a DD-heavy consultancy. One potential avenue indicated by a PE partner I spoke with is to join a PE firm's portfolio team, from which you can network/grind your way into the "deal-side" part of the firm.

Question

(A) In your experience, how viable is a portfolio team in a PE firm as a "stepping stone" to a deal-side role? It was suggested to me that it might be easier in a smaller/MM firm where portfolio roles are less specialised and rigid - is this true?

(B) How do Portfolio Team roles in PE houses compare to deal-side roles, or to external strategy roles? That is, when considering interesting work, comp, work-life balance, etc., from analyst/associate up to the more senior levels?

All answers welcome, those based on knowledge of the UK market especially so.

Thank you all!

Comments (14)

Aug 15, 2018

(A) I'm also a strategy/DD house consultant trying to hustle my way into PE and I can say I have never seen this happen, not once, not even if there was a fire.

Not UK, just anecdotal from a similar position as you.

    • 1
Aug 16, 2018

what's your game-plan to get across, if you don't mind me asking? Do you interact much with PE clients during the DDs?

Nudge

Aug 15, 2018

(A) Nothing is ever impossible, but I wouldn't count on it. The idea behind having an in-house consulting / strategy team is to help improve operations / create value with portfolio companies, not get people in for the investment team. Although the career path isn't that well defined since they these groups are relatively new, the most common exit op would be to an operational role at a portfolio co. Therefore, PE will be very wary to hire anyone who they perceive as wanting to use this as a stepping stone to the investment team. Plenty of PE funds do hire ex-consultant as associate so it's not like getting in at the associate level is impossible. You will need to do a bit of work to get comfortable with LBO modeling, valuation, etc but it's a path that's fairly common. Lots of resources here on consultants interested in PE.

(B) Again, there is no industry standard and the work is going to be quite different from someone working at KKR Capstone vs. a small MM. But generally speaking, comp is slightly better than you would make working at MBB, but nothing like the investment team. The dynamic is also different as you work FOR the investment team. On the other hand, you get to actually do implementation and follow companies / projects over the medium / long term which you don't really get to do in normal consulting. I have a few bschool friends who took that route and they are generally very happy with the switch.

    • 3
Aug 15, 2018

I'd largely echo what the other two folks above have said. I'll mention a third option as a path to PE, which mirrors how I got into PE.

Out of undergrad, I looked at both banking and consulting roles, and ultimately went the consulting route. Quickly after starting consulting, I realized that I wished I'd gone the finance route, and that I ultimately wanted to have the option of being on the direct investing side of things. I wasn't at an MBB, so I knew that banking was the more likely option. I performed well in consulting, but used the time to network and look for banking gigs. I left after a year, stepped into a first year analyst role at a BB, did two years there and then moved to PE. Sometimes the path of least resistance requires you to take a step back. I'm now several years into my PE career and in the grand scheme of things, loosing that one year was no big deal. It also helped during PE recruiting to be able to tell the story of wanting to marry my strategy/ops skills with my technical M&A background. I know that's not what you were thinking, but might be worth giving some thought if you're serious about landing in PE.

    • 4
Mar 22, 2019

I'm curious how you were able to move to BB IB from consulting into a first year analyst role? Is this non-US?

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Aug 15, 2018

No - I was in the States.

I networked pretty hard, it was definitely a challenge. I reached out to people that I knew in the industry and spoke to everyone I could. Ultimately, a buddy of mine who was an analyst at a bank put me in touch with his MD. When recruiting season kicked off, that MD got me in the process.

I made sure I was ready for interviews long before I got one, as I knew that I would likely only get a handful. Was fortunately able to secure an offer from the first BB I spoke to, and stopped shopping jobs thereafter.

Long story short, I just talked to a lot of people, did a lot of prep, and also got lucky.

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Aug 16, 2018

Thank you all - really helpful and much appreciated!

Are there any tips you would suggest going into the strat house, with this potential exit in mind? I'm making my way through the BIWS modelling course, but I'm aware there's not much in the way of demonstrable PE-relevant skills on my CV (exp in in-house strategy at a BB and a big retail bank).

Additionally, what do you think the main gap is that a PE person sees in a strat CV when hiring for PE? I'm assuming the financial modelling aspect is the principal bit, but interested to hear if there's anything else that jumps out in your opinion/s.

Not expecting much in the way of replies - v grateful for your input already.

Thanks again.

Nudge

Aug 16, 2018

What's wrong with being on the consulting/post-investment-value-add team inside of a PE shop?

I think those teams are very well respected, and you get to solve real problems and work with the companies rather than just jockey Excels.
And it will position you better to actually run companies later.

I think though it matters which PE shop you join, and how they approach and value their in-house value-add teams.
If you are at Capstone in KKR, you're going to get carry and be very valued.
If you're at Bain Capital, you'll be valued.
Perhaps some dumb shops maybe less so.

    • 1
Aug 15, 2018

My observations over the last year have suggested the incidence rate of ops professionals sitting on the deal team is <50%; for those looking to be part of the deal team, that is an unattractive prospect.

Aug 16, 2018

that's my point though. why are you obsessed with sitting on the deal team? You can sit on the post-investment management team, and that's not worse than the deal team.

Aug 15, 2018

You can sit on the post-investment management team, and that's not worse than the deal team.

I agree vehemently, but that's also my point. Different people want different things. It boils down to preferences. There are pros and cons to each that will be attractive to different folks based on myriad factors.

Aug 16, 2018

Yeah I get where you guys are coming from - to be clear there's no intention on my part to disparage the choice to sit on a portfolio team.

It's more that it's an option which I've never known much about and wanted to clue up on (hence my question at the start of this thread!)

Nudge

Most Helpful
Aug 16, 2018

I feel ya.
Hey, if it's what the OP wants, then I get it.

Look, the good thing about PE funds is that they are idiosyncratic.
For the most part, they are not like big ass megabanks and consulting firms.

Most PE shops are a couple dozen people.
So if you go to such a shop, and not a megafund, chances are you can negotiate going in what you'll get to do.

I had a buddy of mine (same b-school cohort) who was working in a turnaround consulting firm and hated it. I was working in a PE shop.
I had a few of our MDs interview him.
One really took a liking to the guy, and brought him in under his wing.
He negotiated that he'd work 50% of his time on post-investment, and 50% of the time on deals.
Plus because the firm really needed a portfolio guy, they hired him at more than 2x the salary of us deal guys! And he had no PE experience going in.

Once he was in though, it was up to him to prove he had the stuff to do the deals.
And he did.
Good thing is, he had a strong MD that really liked him, as a sponsor.

After 5 or so years he was able to find an other company (a financial co) that wanted to get into PE.
So they sponsored him to launch a PE fund under their platform, with himself as CEO of the fund.
So that's how he went from consultant to CEO of a fund doing deals directly.
And made CEO to boot, getting the lion's share of the carry.

    • 4
Mar 27, 2019
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