[Experience] Road to PE - Investment Analyst in a MegaFund

Hi all,

WSO has been helpful to me to somehow break into PE, that is why I thought it might be fair to give back a bit by telling how I managed to get in a MegaFund straight out of studies. Just hope it will be helpful for some.

Disclaimer:
This post will probably be useless for people from the US but might give some interesting inputs to European monkeys.
The thread entirely relies on my experience, I am very happy to discuss some of my views

- CONTEXT -

  • Nationality: French
  • Studied in France, in a Target School
  • Come from a middle class family with no bond to finance whatsoever
  • Started working less than 1 year ago as an investment analyst within the European investment group of a MegaFund (among those names: KKR, Carlyle, Oaktree, Blackstone, CVC or TPG - sorry but I do not want to be too specific here).

- ROAD TO PE -

Let's start off with some PE recruiting considerations as it is the core of the matter. As some of you may have recently noticed, more and more PE firms have been opening analysts positions based on the idea that:
- There is so much capital to be invested that having more capacity at a fairly cheap cost is interesting
- Recruiting IB guys as associate is nice but (i) it takes some time for them to catch up (banking is no PE, I know it might seem obvious to many, but not for all according to my experience) and (ii) it is expensive to get them (wage + head-hunter fees).
- There are some other reasons but very specific to every fund.
Having said that, it is fair to say it is - very difficult - to get in with very limited spots available within top PE firms. The best ways to have a shot is (i) to get an internship or (ii) to have a very good network (daddy's one...). Since I did not have any relevant contact, I choose to be pragmatic and to take the internship road.

Three years ago, I had the idea of breaking into PE but I knew it was a long shot and I most probably could get in after 2/3 years of IB in London in a BB banks. In the context of my studies, I had to complete 3 internships which is a fantastic way (i) to get relevant experiences in prestigious shops quite easily and (ii) to be exploited at a ludicrous wage.

For my first internship, I considered that the most important thing was to secure a FT IB position. Even though PE was the final goal, with an IB internship I was killing two birds with one stone. (i) I potentially had the opportunity to get a FT offer, and (ii) it was a relevant experience to help me land a PE internship. Generally speaking, I would not advise anybody to only intern in PE shops because conversion rate is terribly low versus IB. If you are a student, secure an IB (or consulting) FT position first, and then go for PE. I ended up landing a 6-month off-cycle internship at a BB bank within a Generalist M&A team. It definitely was not the best bank but still very decent team with smart people and great exposure. After 6 months, I got a FT offer (like one and a half year ahead of the starting date). Key takeaway of this experience: getting an IB experience is a great way to be properly trained and shaped.

Then, I landed an internship in a good European PE fund within their French team (last fundraising +/- € 1bn). First interview, they told me "Do not expect to get any FT offer here". Hence, the goal was to see if PE really was the Promised Land. It turned out that it was. I enjoyed this experience a lot, mixing finance with corporate strategy and legal was very challenging but the learning curve was incredibly steep and the exposure was great. I was not updating stupid books for pitches or aligning boxes at 4am anymore. Instead, I was feeding financial models with market strategy analysis gathered from expert calls; I was helping associates to deliver investment memos while whipping advisors. Not everything was perfect, but after 6 months of M&A, enjoying 80% of my work was great.

At this point, I had two strong internships on my resume and a FT IB offer. The last internship was not mandatory, I could either spend a few months on beaches in Thailand or I could try to get a shot in a PE fund to land a job. To be honest, I did not want to do a PE internship if I felt like the conversion rate was low… In addition, I kind of liked the Thailand thing… Hence, I decided to go for an internship only if I found something with a fairly high conversion rate.
I networked a lot, especially the Paris area. Talked to c. 30/40 interns / analysts / associates. Got two serious leads in (i) a good MM PE fund and (ii) the fund I am currently working in. "Serious leads" mean three things: (i) ongoing fundraising, (ii) lack of resources at the junior level and (iii) fund with enough resources to easily hire an analyst. I managed to get interviews in both with little networking and a bit a luck I guess.
During the last round, I clearly describe my situation to the interviewers: "I am willing to do an internship but I do not really need to do one. I already have a very good offer on the table, however I want to do PE, I want to work for you but I need to know whether a FT spot might be available for me in the coming months… If not, or if the probability is very low, do not bother, I am sure you will find a good fit to help you out for 6 months".
The first fund gently rejected me. The SVP from the second one told me: "Ok, you have a good profile, we like you. However, we cannot guarantee a position, but our sole analyst will become Associate in the coming months, so we believe one spot might open soon. If you show that you are good enough, it should be ok but again, no guarantee". From there, story is simple. I accepted the internship. It went well. Worked hard. Got an offer.

I guess I was lucky to have found this spot, however I knew there was an opening because I spent hours on the phone with tons of people to know where to look. I do not believe in the "Sending my resume to 50+ funds and hoping for something good to come up". If you want to get a spot straight out of school, you need to do your homework: you shall be prepared to interviews / case studies and network as often as possible (LinkedIn is your friend).

Key takeaways:
- Work hard -> This is the foundation of everything.
- Be pragmatic, self-disciplined and ambitious -> This is what makes you stand out. Be different, be actor of your own life.
- Network, Network and Network -> This is what makes pretty much everything possible.
- Enjoy yourself when you have a chance to -> Well deserved, do not overthink.
- Be nice to everyone (assistants and cleaning staff included).
- Be humble.
- Do not lie, ever.
- Relax; life is not just about work.

- Q&A -

  • Why is it becoming more and more important to get in PE quickly?

As previously stated, more and more PE analyst positions have been created. It means two things:
- If PE funds recruit at Analyst level, automatically less Associates spots will be available to people external to the organization.
- PE funds start to poach analysts / associates from PE competitors' instead of looking for IB / Consulting guys straightaway. One of my former teacher who is a MD at Eurazeo told me "Why bother training someone when you can get another one fully trained at the same wage?".
That being said, (i) PE analysts might leave their fund to get in a more prestigious one but it is not a common move, (ii) there will always be spots for IB or consulting folks but, be aware that there might be less and less.

  • What to prepare for PE interviews?

Several ideas:
- Have a 1-minute presentation and a 3 to 4-minute one: it needs to be structured, do not hesitate to make it a bit "fun" (talk about fun activities such as beer-crafting etc.) and be friendly. You need to be smart, but it is not enough. You need to have social intelligence. If you might work for me for 10+ years, I want to be sure I will enjoy being around while stuck in an airport in Morocco or drunk at an offsite in Greece.
- Classic IB questions, nothing surprising, work your books and you will be fine
- Know how a M&A process works
- Have a grasp about cost of capital considerations ("why would an institutional bid higher than a PE fund?")
- LBO papers (check out Youtube, you have some very good videos)
- Strategy case studies (can be tricky)
- Market sizing (do not freak out, just think, there is no "wrong" answer as long as you demonstrate your thinking and you know how to compute)
- Talking about deals you worked on (know your industry + multiples etc.)
- Opinion on news / companies (take a stand and stick with it, PE requires professionals to have an opinion)

  • What is the lifestyle?

It varies a lot from one fund to another. According to my experience within a US MegaFund, lifestyle is better than IB but not great either. Working late (from 9.30am to 11pm / 2am) during the week. Most weekends are off with limited workload (some refining of models / presentation etc.). I usually travel across Europe with my laptop just in case. Being able to manage my time is great. Nobody bothers me as long as I do the job properly, even if it is from the beach in the south of Spain.

  • What to do after PE?

I sometimes heard it was a weird / stupid question… Why would you leave PE? Why thinking about leaving whereas you just got there? Well, if you do not think about what comes next, you are a fool. You might get bored, you might end up hating your boss, you might get fired, you might want to manage people in a corporate, you might be prevented from being promoted because of internal political reasons, you might have an incredible opportunity elsewhere etc. Be sure to have thought this through before it even happens.

Some interesting leads:
- Portfolio company at management level: I know a former associate from my firm who left the company to lead the "Acquisition Division" of one of our companies. I heard he kept the same wage + a nice MIP. He works from home and travel most of the time.
- PE ecosystem: joining a smaller fund with access to carried or to gain lifestyle, joining a bigger fund for money and fame (lol), joining a family office, etc.
- Consulting at McK, BCG, Bain or within Strat team in PE funds (trendy).
- CFO / CEO for companies under LBOs.
- If you are planning on staying a long time: Senior Advisor sounds like a good plan.

I might add some content depending on questions, if any.
Feel free to ask anything.

(Apologize for any silly grammatical or spelling errors. All the best to you all.)

Comments (20)

 
Apr 12, 2020 - 6:58pm

Many thanks for the detailed quality content. It should be a must read for all European students who want to break into PE.

Several questions:
- Do you expect your lifestyle during the week to improve in the coming years? I thought it would be much more cyclical (like 9pm most of the time and 3am when you have live deal).
- Is leaving your PE fund for a portfolio company really a thing? I mean, is it something that happened once or is it something you see regularly?
- What are your views on the current european PE market considering the covid19 situation (recruitment, opportunities etc.)?

 
Apr 13, 2020 - 6:27am

Thanks. Happy you enjoyed it.

To be fair, I do not expect my lifestyle during the week to improve that much until VP. It is quite specific to my fund as we focus on three types of investing: (i) classic LBO w/ a focus on distress, (ii) special sites (mainly real estate) and (iii) creation of platform. (i) and (ii) are time consuming but very cyclical, this is why I would have a similar lifestyle than most people in PE if my team was not creating platforms as well.
Creating platform means, you dig a sector that you like (e.g. student housing), you pick a manager, create a company from scratch and deploy capital (by investing into RE or through build-up). To be fair, I think it is the thing I like the most in investment. It is very entrepreneurial but takes a lot of time on a daily basis as you basically act as the CFO, Business Developer, Marketing Director etc.
At the end of the day, i end up monitoring 3 portfolio companies, 2 platforms+ several live opportunities. This explains why lifestyle is not the best at my fund.

Yep, leaving you fund for a portfolio company is a thing. It is well perceived by people from your organization as you are not leaving to join a competitor and you are still part of the "team" in a way.

Complicated question, plus I am still a junior, so I am not the best person to answer this one... I believe the key motto is "wait and see". I believe the coming years are going to be tough with many companies struggling to stay alive. Great days for distress investors are coming for sure. Difficult days for many MM funds (debt and equity) that have been stupid and unnecessarily greedy.

 
  • Analyst 1 in PE - Growth
Apr 12, 2020 - 10:25pm

Totally agreed with the networking part. Just curious - how do you ask someone you reach out to give you info on which other groups may be hiring in the new future, without making them feel "used"?

 
Apr 13, 2020 - 6:46am

Good question.

I contacted people at junior level (i.e. analyst and associate or even current intern if necessary, otherwise it is very difficult to get feedback) who knew someone I knew. It means I focused on people with whom I had a relation in common at first (easy to see on Linkedin).

Finance, especially PE is a very small world, I asked (i) my friends who interned in many PE shops across Europe to introduce me to analysts or associates and (ii) some of my teachers who were investment professionals (if they are wasting their time to teach, it means they are here to help people out, so very good contacts for students obviously).

From there, you can contact pretty much everybody saying "Hello XXX, I hope you are doing fine. I recently discussed with [common contact] who told me you were working at XXX blablabla". Usually, people feel like it is not a random dude asking for information. They value you because you know someone they like and feel like they should answer (social pressure basically aha). It helps a lot to have a very decent conversion rate and interesting talks (no marketing crap). From there, being friendly and well-prepared help a lot, because people you reach out might tell you to contact someone else they know if you spin your speech in the right way.

 
Apr 14, 2020 - 12:16am

Thank you for the post! Just a quick question, how do you constantly try to better yourself in non-technical areas (eg. PE knowledge, keeping up with latest PE activities). I'd think these are areas that help tremendously in networking and being able to hold meaningful conversations with your MDs.

 
Apr 14, 2020 - 7:02pm

On the one hand, I believe non-technical skills are very important, however on the other hand, I am not sure being knowledgeable about PE is the most valuable thing in this category. I mean, obviously, a MD would expect you to know what the latest biggest deals and the general trends of the industry are (e.g. where are we in the cycle, multiples level etc.).
However, I believe a MD would better value (i) your general knowledge (about anything, especially the latest news about politics or economics, not just finance related) and (ii) your social skills (i.e. social IQ). The few MDs I impressed were more amazed with me discussing sports, economy or literacy than by recited PE related things (which are boring to them). The only thing that can make you look very smart is if you are very knowledgeable about a specific industry or deal in which you could discuss your views with the MD (if you are lucky he / she likes the industry). Note that it is rare to be able to do such a thing and quite a dangerous ground.
At the end of the day, if you are a potential candidate, a MD is not here to evaluate nor your technical skills, neither your knowledge about the industry (this is the role of the Associate / VP), he / she wants to know if he / she is willing to see your face every day for a few years and whether you would be a good add-on to the team as a person.

To better yourself:
• About finance / PE: read Howard Marks memos, the FT (15/30 min per day during the week on your smartphone)
• Otherwise, you need to learn by doing. Try different things with different VPs / MDs and see what works the best for you. Just keep in mind, 15 other kids will talk with them as well, make sure you are not "serving the same soup" as we say in France. Be smart, adapt to the person you talk to (some MDs are fun and joyful, others are jerks etc.). You need to quickly identify who they are to better target what to say.

 
Apr 18, 2020 - 5:49pm
  • Did your firm provide any form of training? Or is everything based on learning-by-doing and see what you can pick up.
  • Would be interesting if you could shed some light on your daily work (how much and to what extent are you responsible for the models, conduction expert interviews, IC memos etc.)
  • How is the work distinct between you and an Assoc.
  • Did the previous Analysts also come fresh from university, albeit with internship XP
  • I would imagine pay is slightly under/same as an Analyst 1 at a BB? base: £50k + bonus: 30-40?

And i think that you unintentionally provided the info where you are working (i) US firm (ii) distressed focus (iii) Analyst. I dont believe that KKR, BX, CVC, TPG fall into this category.

Thanks for taking for this - good to have decent info about the PE market in Europe

 
Apr 18, 2020 - 7:50pm

Did your firm provide any form of training? Or is everything based on learning-by-doing and see what you can pick up.
- No training provided. You learn by doing with a decent support from Associates and VPs when required. Not ideal but it is a great way to learn if you are lucky enough to work within a nice and supportive team, which was my case.

Would be interesting if you could shed some light on your daily work (how much and to what extent are you responsible for the models, conduction expert interviews, IC memos etc.)
* To be fair, my team allows me to be very independent and autonomous. I take care of all models (from opportunities review, to sell side and to buy side). Obviously, those are checked w/ associates or VPs when it comes to serious things. I have a decent background for modeling which helps a lot. I started managing expert calls on my own after one year at the firm (especially when it comes to understanding the basics of a given market). Of course, if it gets "serious" a VP jumps in. All the deal team works on the IC memo, my role is to mainly run the analysis (model + markets + valuation), integrate the inputs of everybody and format the all thing. On a daily basis, I also participate to some meetings (both new opportunities and portfolio companies related), I would say 3 to 4 a week. At the end of the day, my job consists in having a first look at many things to narrow down the interesting opportunities with a constant support / review of my Asso / VP (which mainly help me on the technical side of things).

  • I would say I spend 50% of my time on portfolio companies and platforms, 40% to review opportunities (NDA, IM review, Q&A, models etc.) and 10% on admin related things (training, compliance etc.). It of course varies a lot depending on the period.

How is the work distinct between you and an Assoc.
* Same but you get more responsibility (MD picks you on time sensitive deals, increased workload etc.) and exposure to meetings.

Did the previous Analysts also come fresh from university, albeit with internship XP
I would imagine pay is slightly under/same as an Analyst 1 at a BB? base: PS50k + bonus: 30-40?
* It depends, the firm has been doing lots of recruiting at Associate and Analyst levels. Most of analysts recruited interned at the firm and had a strong CV with indeed several relevant experiences at BB banks / consulting.
* Base: €60 - 65k + 30 - 40 bonus. Then you have a big gap between first and second year of analyst.

And i think that you unintentionally provided the info where you are working (i) US firm (ii) distressed focus (iii) Analyst. I dont believe that KKR, BX, CVC, TPG fall into this category.
* That might be a good guess. I would just specify my team investment focus relies on my MD's background and is not directly related to the firm I am working for.

Thanks for taking for this - good to have decent info about the PE market in Europe
* Glad you enjoyed it.

 
  • Analyst 1 in IB-M&A
Apr 18, 2020 - 11:56pm

How did you answer the question about why you wanted to work at a Megafund vs. a smaller shop? Was it very specific to the fund's strategy, or more general? Thanks!

 
  • Analyst 1 in PE - LBOs
Apr 19, 2020 - 6:15pm

I don't think that you have to choose at the analyst level... opportunities are scarce enough, especially in Europe. Even scarcer if OP is based in continental Europe

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