Private Equity Associate
There's a perception of people on the street that private equity is the cream of the crop. The hours, the pay, the beloved carry, the work itself - is it all greener grass syndrome? Not quite, private equity is pretty awesome by most standards; that's why becoming a private equity associate is ten times more difficult than becoming an investment banking analyst. Luckily, everything you need to know is right here.
Private Equity Associate - What Do They Do?
PE associates' days are primarily spent on a few different things. Here's a day in the life of a PE from @samoanboy. If you want to skip ahead of this quote, there's a nice summary of what they spend their time directly below.
Day in the Life
As previously mentioned, I spend a lot of time out of the office, but a standard office day would be as follows. (This is based on last Friday.)
8:00 am - 8:30 am Arrive in the office, read emails that came in overnight from Asia / US, try to follow-up with people in HK / BJ ASAP before they head home for the day.
8:30 am - 9:00 am Skim through FT, WSJ, Bloomberg, etc., to see if there is anything interesting on any of our underlying portfolio companies.
9:00 am - 9:45 am Call with CFO of one of our GPs to discuss co-invest opportunity in a med tech company. Go step-by-step through their models, question their assumptions, and compare with my initial model - usually my earnings growth estimates are significantly more conservative, and I need to be 'up-sold'.
9:45 am - 10:00 am Discuss call with one of our principles. We both feel that we have plenty of healthcare in the portfolio, and this doesn't pass our >3x MOIC for serious consideration of a co-invest.
10:00 am - 11:00 am Managing Partner of a Indian Mezz Fund who is raising $250m comes in to talk us through the proposal. Past funds have done well, but we have significant concerns about the risk/reward for EM mezz. Meeting focuses on quality of management in these businesses and their disinclination to give away sizable equity stakes.
11:00 am - 12:00 pm Writing up some meeting notes from earlier in the week and sending a few post-meeting DD emails.
12:30 - 14:00 pm Lunch presentation at a hotel from one of the US megafunds currently raising $8bn. I hate the strategy, the lack of decent exits, and the fact that these businesses are highly skilled marketers rather than highly skilled investors. We won't invest, but it's good to know what the competitors are looking at. Megafunds are good for people like CALPERS who need to write $500m cheques and investors who rely on consultants for their DD, but for more niche / adventurous players, they are not very exciting.
14:30 - 15:00 pm Internal meeting to look at our pipeline and discuss travel arrangements. We have three LP meetings in one week in NYC in two weeks time, and I'll be attending. I always enjoy traveling, but these meetings will be exhausting.
15:00 - 16:00 pm Reference calls with existing investors in a fund that is about to have its final close. These are probably the best way of getting to know a new manager. On this occasion, no new issues arise, and we will proceed with our legal review.
16:00 - 18:00 pm Emails, meeting notes, bit of modeling, but it's Friday, so I'm concentrating on the weekend rather than the work. Leave at 6 pm and drink for the rest of the weekend.
Here's what a typical PE associate spends their time on, again from @samoanboy.
Primary Fund Due Diligence / modeling / meetings / reference calls / legals - 50%
Annual LP meetings / traveling to meet FMs - 20%
Coinvests / Secondaries opps analysis - 25%
Boring admin shit - 5%
How to Become a PE Associate
Before we tell you anything else, understand thatis far, far more difficult than investment banking. In order to get into private equity, it's nearly a necessity to have done investment banking. There are two main avenues to landing interviews for the associate position. They are:
- Impressing a headhunter who connects you with the firm for an interview
- Networking with PE firms to land an interview
Option 1 is for people currently in investment banking if they want to break into private equity. It is by far the simplest and most effective way to land interviews while you're in investment banking and pre-MBA. Option 2 is what most people do while getting their MBAs. Acing the interview is another question.
Joining Private Equity from Investment Banking
Private equity recruiting for investment banking analysts is on-cycle, meaning recruiting is a very mechanical process that starts a few months into your first year. Joining PE from investment banking is best done with a headhunter.
Think you can avoid this process as an investment banking analyst? Think again. Here's a tidbit from @I Invest about the path from investment banking to private equity.
The street and recruiting process are structured in this manner. Headhunters sift through IB analysts (primarily) and work with PE shops to hire IB analysts after their 2-3 year program. This question is almost like asking, "Why do people do internships to get into IB?" It's simply how the system works at the present moment. The primary avenue to PE is IB.
So hopefully you understand how integral headhunters are to the process. Here's everything you need to know about your relationships with headhunters, summarized beautifully by @Candor. It's long, but it's worth the read.
Headhunters - Everything You Need to Know
Plain and simple, everything starts with the headhunters. They are the gatekeepers to basically every interview process and are incredibly important. If you work at aor an elite boutique, the headhunters will begin reaching out to you in October / November. You do not need to email them before you start working or anything like that - it'll serve you no benefit and will only hurt you in the process. They'll reach out to you.
With that said, I have a funky email address that includes my middle initial, so when all of my peers received the messages from Dynamics//Amity/Glocap/etc., I did not. This sucks, but just have one of your coworkers forward you the email they received. It is perfectly fine if they haven't emailed you, and I'm sure they'll be more than happy to speak with you if you email them introducing yourself and asking to meet in person.
There are a few important points to note with these headhunter interviews. First and foremost, you only get one shot at meeting/impressing them and proving that you'll be capable of going through PE/recruiting and being in front of their clients. Treat these initial interviews as you would any other important interview. I see people on here saying, "Ah yeah, the headhunter meetings don't matter much." This is the wrong attitude. Unless you're at /other top groups, you absolutely have to come off polished when you meet with them.
I prepped for these meetings like I was prepping for a first round interview. They'll ask you to walk them through your resume, what you're looking for, why PE or why HF, where do you want to work, what kind of funds are you targeting, what are some names you're targeting, things like that.
One of the ways I think you can differentiate yourself here is knowing EXACTLY what you're looking for. If you can name specific funds and why (e.g., Is it their specific strategy? Is it because you worked on a deal with them? Do you know somebody there? Did somebody from your group go there? Is their head of C&R/Healthcare/Tech investing really well known? etc.), it'll help you immensely. I think I got interviews at a few places because I specifically listed those firms as firms offering what I could consider a dream opportunity.
If you have a deal on your private equity resume, expect for some of the headhunters that are former bankers (e.g. , Glocap, HSP) to ask you to walk through the deal. I had kids in my group not prepared for these meetings and get sort of grilled ( did this) and not receive any interviews from that respective headhunter, while I received multiple interviews because I came prepared.
You can't come off wishy-washy here. You need to know that you're either doing HF or PE, what size fund (i.e., middle market/large cap/MF/lower middle market/growth equity), where, and why. You can tell different recruiters different things (i.e. tell one you want PE, another you want HF), but unless you're at a top group that consistently sends people to MFs/top HFs, then you need to know what you want.
Another thing I'd like to note is that, while the headhunters are the middle men in the process, you also play an important role, and it is in their best interest to meet as many candidates as possible to try to place as many people as possible. That's how they get paid. They understand that you're a banker and there are a lot of demands on your time/life. It is perfectly reasonable to wait to respond to their introductory emails several weeks (or months) later to make sure you're ready.
I waited until December to meet with the headhunters, and I was fine. If you need to cancel and reschedule, that's fine too so long as you do it professionally. If you know one week you're going to be getting crushed and you have a headhunter meeting scheduled for 8:00 am that Wednesday, email them and ask to reschedule; they understand. Just don't do this several times.
Lastly, not all headhunters are created equally. Some of them, for whatever reason, just won't click with you, which sucks but it is what it is. Some of them are just dicks and aren't worth your time. I had a particularly awful meeting with one of the recruiters atwhere the person essentially told me I was an idiot and I didn't understand the size distinctions between PE firms. Jokes on them, I got 3 offers in PE despite "not knowing what it is".
I would try to put all of that information into a concise paragraph, but the truth is all of the above is too valuable to skip over.
Getting into Private Equity During Business School
There's one magical word that is crucial in landing interviews with private equity firms while in business school: networking. Basically, private equity firms recruit at top B-Schools just like investment banking firms recruit at top undergrad universities. Take advantage of those recruiting opportunities and network, we assume because you have some investment banking experience (again, it's pretty much a prerequisite to PE), you have a decent understanding of networking.
Private equity is seen by many as the endgame, but what about for those who don't feel that way. There are a number of common exit opportunities for those individuals:
- Other financial institutions (hedge funds, firms, etc.)
- Portfolio company
That's not all there is to it, however. Here are some thoughts from @lolercoasterrr regarding exit opportunities after private equity.
So I am one of these junior ex-PE guys and know a bunch of colleagues who have left. Pretty much spot on what's been said. A few just move around to different PE firms. Several do really cool corp dev gigs in industries they love (e.g. sports or entertainment). A large number (including myself) go to b-school. After b-school people either usually go back to their old shop, another PE shop, into a structured "MBA corp dev" program (e.g. an oil and gas company, cargill), a privately sourced corp dev opportunity, or more commonly nowadays - a startup. I've seen a lot of guys go into biz ops or strategy roles at fast growing startups. I've seen some go into consulting ( ) post-MBA, too, but those are less common and I don't know the rationale.
Private equity compensation is something best answered in an entirely thorough manner. Of course, you probably want to skip to the fun part and check out the total compensation, so keep reading.
First, understand that there are several factors that determine compensation for PE associates - carry (if any), different bonuses, and base. Before that, we'll tell you what you really want to hear about - total compensation. All in, an associate can expect to make $200-250k.
Base compensation is a little above what you'll find in investment banking, something north of $100k.
Private Equity Associate vs Investment Banking Associate
Why go through the hassle of private equity recruiting opposed to trying to become an associate at the investment banking firm you work at? Here's an answer to this question from @I Invest.
There are a boatload of reasons why people leave IB. It's a tough gig as a junior. Committing to do the A to A thing is basically accepting 6.5 years of a rough lifestyle. I honestly think most people recruit for buy-side because most people recruit for buy-side. However, people do leave the IB role for other opportunities (b-school, corp dev, etc.).
The biggest attraction to leveraging a junior IB role for two to three years is that you're essentially placing yourself on a platform where you can exit into almost any industry. There might not be another time in your career where you can essentially exit a job and do almost anything. I spent three years at a top group at a BB. I honestly felt like I could have recruited for almost any role I desired (PE, HF, VC, Startup, F500, etc.). Now that I've decided on PE, I don't necessarily feel that way. For example, if you move to a distressed hedge fund, you're a distressed hedge fund guy. You might have a hard time recruiting for an equities event driven fund. As an IB analyst, you could recruit for both easily.
A lot of you are probably thinking, yeah alright, but which pays better guy? First of all, that's the wrong attitude, buddy. Second, while the pay at junior levels between private equity and investment banking is comparable, as you move up the ladder, it's likely you'll make more in private equity because of carry.
Here's a nice summary of the pay differences between the two types of firms, courtesy of @I Invest.
Further in your career, especially at a successful performing fund (stress on the word successful), you should make more money as a Partner at a PE firm versus being an MD in banking. It's hard to beat meaningful carry at a successful performing fund. As a junior, the biggest misconception on this forum and across the street is that pay is better at the junior level. Yes, if you attain an Associate role at Apollo, you will make bank relative to staying on your IB track. However, in most cases, I would say the pay is very comparable, especially with the increase in IB pay across the street over the last year or so. The difference for most people will be nickels and dimes (I don't mean 5 cents and 10 cents literally, talking thousands), which after tax isn't particularly meaningful at all.
I'm a first year PE associate and my best friend is a first year IB associate (A to A promote). I'm willing to bet all in the difference between our pay won't even be worth a discussion. Again, I think this is the norm. However, yes, at a mega PE shop (e.g. Apollo, BX, etc.), I would expect the pay difference to be more meaningful at the junior level.
PE Associate Hours
What are the hours like in private equity and how do they compare to investment banking? Generally, the hours are less grueling than in investment banking, but don't let that fool you - you're still putting in time. Here's an anecdote from @I Invest on what he's seen on the street.
In most cases, all my friends (who went from investment banking to private equity) now have better hours. The exception is my one or two colleagues who went to the mega shops. I would say the mega shop colleagues actually have worse hours than IB!
Let me be clear by what "better" means though. This forum tends to have a misconception of the "better hours" theme. I still work hard. It's a job in high finance. I believe the better hours really are a result of more autonomy and my work not being client driven. I have more control over the timing so I can manage life better. No more of the surprise 8 pm deck that needs to get done for a client by tomorrow afternoon to discuss the mega deal that will never happen.
At smaller firms, you can expect 60-70 hours opposed to the typical 80 hour week in investment banking. At megafunds, expect 80 hours a week.
All of this goes out the window when you're working on a deal. In those weeks, expect to put in hectic hours, north of 80 hours.
Original Thread - How to make VP in Private Equity
A few weeks ago, I shut down my ThinkPad for the last time, turned in my security badge, and said farewell to my colleagues - and to PE and private equity interviews. I found myself in a position in which many private equity associates find themselves every summer: thanked for my efforts, praised for my "excellent work as an associate," but ultimately admonished that there wasn't a "path to VP for me," and it was time to move on. Such is life.
Nice as it might have been, the senior ranks of private equity probably weren't a long term fit for me. But while it might not have been a fit for me, I know that is not the case for many on this board - securing a slot as a VP en route to partner at an established PE fund is that holiest of holy grails.
In that vein, I thought I'd offer a few tips on making the transition, given that I've seen a lot of advice on how to break into PE, but not a lot of advice about how to stay there. I may have not made the cut myself, but after going through the process, I think I have a pretty solid idea of what it takes. This is tailored to a private equity associate, but a lot of it applies to just about any situation where you are trying to make the leap from junior guy to senior manager - investment banking, corporate development - wherever. So let's get to it.
You first need to understand exactly what being a VP entails. It doesn't just mean less time in, more time on the phone, and a little more responsibility. It's a fundamentally different job with a fundamentally different skill set. This is the core reason why most associates never make it to VP. Associate work is about analytics, modeling, presentation building, and plowing. The VP position is the first step towards what private equity is really all about: convincing other people you know what you are doing.
Senior partners need to convince LPs they know what they are doing, so the LPs will give them money. Junior partners need to convince business owners they know what they are doing, so the business owners will sell them their businesses. And VPs need to convince the senior folks that they know what they are doing, so the senior folks will trust them to manage a deal. So how does one go about becoming a convincing guy and not just a numbers monkey?
1. Work on your presentation skills. The ability to express ideas clearly, succinctly, and in a manner that is "confidence inspiring" is without a doubt one of the most important attributes of a successful senior PE professional (and any executive for that matter). I've seen a lot of senior guys in PE with mediocre technical skills succeed because they were really slick presenters and could talk their way through any conference call or meeting. I haven't really seen it the other way around.
2. Start speaking up more often. The prevailing attitude in IB may be that an analyst is better seen than heard, but that's not the case in private equity. Don't just bang out models and then rely on those above you to present all the results to the investment committee. Similarly, don't just sit through diligence meetings only to take notes.
Now, you'll have to use some discretion as to when and how often you speak up. Don't show up day one and try to lead an investment committee review or hi-jack a diligence session. Start small. Ask a few (good) questions in diligence sessions. Chime in with a few interesting points you picked up on customer calls during investment committee. As you build confidence and rapport, start increasing your air time. By the close of your second year as an associate, ideally you will be presenting decent-sized pieces of your investment memo / model / analysis to the senior partners, leading some of the more technical conference calls (e.g. walking through a revenue build with management), and offering some intelligent reasons why a particular investment does or doesn't make sense in group meetings.
3. Develop a healthy respect for yourself and your role at the firm. As an investment banking analyst, you were at the bottom of the totem pole and were treated as the lowest of the low. Nobody gave a fuck about your time, your schedule, your needs, or your opinions. You were there to serve others, period.
This kind of treatment day in and day out can start to have a perverse effect on your thinking. You start thinking that "the firm's" needs are more important than yours, people above you are "better" than you, their time is more valuable, and you should do everything to please them at all costs. While this may work as a junior guy, it isn't going to get you to the next level. Your partners need to have a modicum of respect for you before they promote you. So stop walking on eggshells and sweating every time the higher-ups pass by. Start walking around the office like you belong there.
Participate in conversations with the conviction that you have something valuable to contribute. If you think your deal team needs to take an analysis in a different direction, let them know. If a good deal comes down the pipe, ask to be put on it. If you're getting a bunch of bullshit projects or feel you are not getting the kind of experience you want, speak up (tactfully of course). This may seem crazy at first, but try it. You'll be surprised at how differently people will treat you (and how much better you'll feel about yourself).
4. Separate the work from the people asking you to do the work. Given you work in high finance, the probability is pretty high that you are working (or are going to work) with assholes. Don't let this affect your work. You are a professional. You get the job done no matter the person in charge or the bullshit thrown your way.
Approach your work the same way Navy SEALs do. They don't care who is in the White House giving the orders - once the orders come in, the SEALs focus on the job and nothing else. You should do the same. If you have a legitimate gripe, take it up directly with the relevant person. But don't sit around complaining and bitching.
5. Find your niche. A good way to ensure the senior guys keep you around is to make yourself needed. Have you worked on a bunch of debt deals for tech companies? You are the guy to get financing packages for any tech deal that comes down the pipe. Worked through multiple 338(h)(10) deals? Be the tax structuring guru. Lots of experience with oil and gas? You are the oil and gas guy.
Take the hand you are dealt and turn it into a defensible niche. Build relationships with key guys in the space (bankers, consultants, research guys, industry guys), stay on top of what's going on in your area (market trends, M&A activity, tax law changes), and make everyone aware you're there to help or take the lead when the time comes.
6. Start acting like an independent operator. As an associate, you typically have people telling you what to do: build this model, look at this document, put together this presentation. You need to start learning how to make moves yourself. Build general relationships (go to lunch with bankers and industry guys), think about how to add value to your portfolio companies (float your ideas by the deal team and bring it up at the board meetings if possible), develop direct relationships with management at your portfolio companies, think about different approaches to deal structuring issues, and come up with investment ideas. Basically, think about what needs to get done in order to successfully enter, hold, and exit deals, and do it without having to have someone come and tell you exactly what to do. This will go a long way towards distinguishing you from the run-of-the-mill associates and getting you closer to that VP title.
There are, of course, more tips out there but these are the most relevant in my opinion. The transition to VP is a tough nut to crack, but if you do these things and there are not structural barriers in place (like the firm has a very strict two and out policy), you should at least have a fighting chance at VP.
Best of luck, fellow monkeys.
Interested in Private Equity - Here's What You Need to Break In
Private equity is recruiting is ten times more cut-throat than anything you've ever experienced before. If you want to break into private equity, you need to be well-practiced in the technical aspects of the interview. The package is worth well more than the $299 price; the job prospects you set yourself up for are worth far more than $299.