Does it make sense to try and lateral from a small investment firm to a LBO Fund or larger BDC after a year?

Hello everyone!


I was hoping to get someone/the community's thoughts on my current predicament. I am a PE/investment associate (career track) working at a small equity investment firm underwriting both minority and majority equity investments sourced through traditional auction processes. We are the sole sponsor partnering with the management team (not supporting another sponsor) and outside of new deal execution, my job on the portco monitoring side is for the most part to execute (diligence, valuation, & documentation) on add-ons for our portfolio companies which are all typically very aggressive on the consolidation front. I am close to a year in but was originally deep in the recruiting process with traditional LBO shops until COVID happened, fortunately this job came around.

I am wondering if this dynamic (working for a small equity investment firm, not doing buyout transactions, working on minority deals) will make it tough to lateral to a more traditional buyout firm in the future at a higher role (sr associate/VP) and if so, if it would make sense/is feasible to lateral to a buyout shop after a year or so is up to start getting the "right" experience rather than stay and recruit after 2/3 years. Or if it would be materially easier to lateral now to a larger small equity investment firmthan it would at the 2/3 year mark at a higher position.

In IB, if you don’t get the IB gig you wanted specifically, lateraling in your 1st year was pretty straightforward and intuitive with plenty of spots open due to attrition and so it made a lot of sense to lateral after a year or so at a smaller shop, but I’m not sure what the dynamic is on the buy-side. If lateraling after 2/3 years is not materially tougher or simpler, I would prefer to stay put for now.

Appreciate any and all thoughts.

 
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It's a BDC but you're mainly doing equity deals? Or is it more an across the capital structure mandate? I ask because most BDCs are direct lending vehicles 

Also what's your background? Is this your first role? Will help in forming an answer to your question

 

Sounds like Prospect Capital Corp; if so, I would stick around for some  years and try to lateral into a Senior associate position at a buyout fund. Key thing I would recommend is getting your hands on as many reps as structuring negotiations & credit agreements so that you can tout your ability to think as both a debt & equity side and also have legal documentation knowledge that would prove you well in a buyout gig at Senior Associate / VP level.

 
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I mean candidly it's definitely non-traditional for them, especially if you're targeting a brand-name which gets "typical" candidates from the usual MF/UMM shops (and since you were in a banking seat before selecting this role). That being said, the key here is positioning your resume/story and hitting it right with recruiters to make sure you communicate that although you have a more unorthodox background for lateraling into a vanilla MM/LMM shop, your experience across the cap structure makes you a more well-rounded and astute investor who can add value not only to the usual investing process, but maybe even have a hand in helping structure the debt or other financing required to help bring the deal across the line. Think this would be extremely valuable in the LMM scenario given they often deal with more "unique" scenarios deal to deal given the smaller transaction sizes.

 

I'm confused by what you mean by lower standards? Do you mean you're closing deals where you feel the quality of work is below par or the quantity of work is below par? If its the latter, it could be your shop is just more efficient with figuring out which deliverables are more important than just busy work. If its the former, how do you know its low quality? Are you closing deals where you know the model is wrong and return expectations way off or something? What do you mean by getting too lax about things? I think we'd be of best help for this concern of yours by hearing some examples. As to your point of being branded as a "quasi PE-guy", who do you think has a better skillset as an investor? Someone who knows how to structure deals throughout the capital structure or someone who just knows how to look at buyouts? 

 

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