How much do you learn as a 3rd year IB Analyst vs 3rd year PE Associate? (How common is a 3rd year in PE?)

banker2018's picture
Rank: Baboon | 143


I plan to go to business school after 5 years of work experience. I'll be working 2 years in IB for sure starting in July, but am unsure if I want to recruit for PE this year or recruit as a second year.

Path 1: Recruit this year - 2 years in IB, potential for 3 years in PE (but might not get as great of an exit since I have no experience)

Path 2: Recruit next year - 3 years in IB, forced to do only 2 years in PE (if I want to get my MBA after 5 years work experience). Less time in PE but maybe a better exit since I'll have a year of deal experience.

My questions are:

  1. For PE firms that force you to get an MBA to get VP, how common is receiving a 3rd year offer? Very common or not so much? (If it's not that common then maybe I'd prefer to just do 3 years in banking rather than 2+2)
  2. Do you think spending 2 years in banking and 3 years in PE will provide significantly better learning opportunities than spending 3 years in banking and 2 years in PE?

Long term goal is definitely PE and will absolutely not return to banking or stay in banking past 3 years.

Thanks for the advice!

Comments (42)

May 2, 2019

You'll find that most people recruit their first year so that they have something lined up a year out right after their second year of banking. Everyone is in the same boat, your exit will be fine. Middle market PE firms tend to offer a third year / senior associate offer if they think you could potentially be promoted to VP. They may or may not require you to get an MBA. Some other PE shops are a three year stint (i.e., Summit Partners). The "traditional" path is two years IB and two years PE for four years of experience before MBA, but you seem set on five years of work experience. Is there a reason?

May 2, 2019

Would need some more information about you, but don't miss any opportunities to move to PE. Many shops have a typical "on-cycle" hiring process, and so if thats recruiting 1st years to join two summers later, you need to be on that bus. "off-cycle" isn't a place you want to be if you can avoid it.

The downside is going to an MBA program after 4 years experience, or doing a year of corp dev or working with a startup before the MBA, so just recruit asap.

    • 1
May 2, 2019

Background info: At a top group medium tier branded bank in NYC. Has a history of decent placements. Have terrible SAT/ACT scores but a 740+ GMAT. I'm interested in buyout shops and do not want to be in the LMM. Hoping to be working with companies at 200-500MM EV.

I've got a near 4.0 GPA from a finance program but the problem is that I went to a non-target state school. I've heard from some people that if you have a non-target background it's better to wait until your second year to recruit so that you can say that you were a top-bucket analyst and so you have good deals to talk about.

I guess I'd want to do 3 years in PE rather than 2 years just because I'm not exactly sure that I'll return to the buyout space after business school and figure it'd be nice to spend as much time in the space as I can since it's very intriguing to me (even though I might not want to stay in buyouts for my longterm career).


You guys think even with my non-target background I should still recruit on-cycle in my first year? I've heard that if you strike out on-cycle your first year that headhunters will think of you as damaged goods, so it could be harder for the 2nd year on-cycle. What do you think?

May 2, 2019
  1. Depends on the firm. At mine, people are given a path to be promoted to VP/Principal without an MBA. This is not offered to every pre-MBA associate, but certainly happens to more than one person per year.
  2. Banking and PE are what you make of it. I think in either industry the first year requires a steep learning curve, but after that it is what you make of it. If you choose to be proactive and constantly learning, you will learn. This is my fourth year in Private Equity, and I actively try and learn something new everyday, which allows me to enjoy my job. I find it fulfilling that I am able to, at least in my mind, positively impact companies, learn a lot, and get compensated well.
May 2, 2019

Thanks for the insight! So you think the marginal benefit is of 1 extra year in PE vs 1 extra year in banking isn't that large as long as I'm actively trying to learn and improve during my 3rd year as a banker?

I know you're at a firm that allows you to skip doing an MBA, but could you speak to firms that kick out their associates? Do the firms that kick out associates still often allow them to stay for a 3rd year or is it really only common to get a 3rd year if you're at a firm that would consider promoting you to VP?

May 3, 2019

Totally up to you. I think you are really overthinking the one extra year at banking versus private equity. My point was that at any place you can learn, and is dependent on the person. To be honest this is sort of a stupid question. Not sure why you are set on 5 years before business school or why you think there is a real answer to what you will learn in banking or private equity.

Some firms that I know require pre-MBA associates to get an MBA are Carlyle and Hellman and Friedman. I believe they allow you some extra time to figure out your plans if you don't have them. Nothing is really set in stone - a firm isn't going to let a top performer go.

    • 5
May 4, 2019

You don't know anything yet start working then talk.

May 6, 2019

Given that on-cycle is going to be in like September or something, I think it's important for me to consider this stuff now.

May 6, 2019
  1. It is entirely firm dependent. They are all very up front about this in my experience.
  2. Get to buyside as quickly as possible. You'll have to judge yourself and your story whether or not you think a whiff at year 1 recruiting is high probability or not.
May 6, 2019

In general, neither firms nor headhunters will dock you for wanting to wait until your second year. Timing of the PE recruiting process is so early now that it almost makes sense for all but a few exceptions. If you come off as smart and interested in your job during the initial meeting with the headhunters, then they will have no problem entertaining a candid conversation about your situation; most will tell you that it's no problem for you to recruit during your second year. Keep in mind that there is a bit of a risk associated with waiting a year since you'll be a known commodity after going through a couple of review cycles during your time in banking. What do I mean by this? A lot of the headhunters will know associates at the banks where they typically recruit analysts from, and if you aren't generally known as an upper-tier performer then that could potentially be brought up in these conversations, which will impact the PE opportunities those headhunters are willing to connect you with in your second year. In your first year no one knows anything about you - unless you performed really well/poorly during your internship - so the headhunters are just going off of their impressions of you.

To your questions:

  1. Entirely firm dependent. If the firm likes you and you've performed well, then there's usually no issue with sticking around for a third year as long as there are no headcount issues (some groups/firms are stricter about this than others). This is a question you can easily ask headhunters though when you talk about the scope of firms you're interested in. And yes, as others have pointed out on this thread, it's unclear why you are so set on 5 years of experience pre-MBA. If you happen to end up in a place where third year offers are hard to come by... then just apply to b school during your second year and do 4 years total
  2. I think there's a bit more opportunity to learn in PE simply due to the subject matter - you're going deep on different businesses, so the content you'll encounter is much more variable in PE given that aspect of the job (there are others, but this is the biggest thing in my opinion). That being said, if you are focused on trying to grow and learn, and if you really feel like you've maxed out the learning curve as an analyst in banking (which can happen depending on deal experience), then focus on taking on responsibilities of associates. Learn to manage other people and processes, collaborate with your VP on ideas to present to clients and crafting the materials, etc. There is a lot done in IB beyond the analyst level that is valuable in general corporate settings, so if you have the right mindset then experiencing all of that can be a valuable learning experience
    • 4
May 6, 2019

Thank you so much for the detailed reply! Based on my summer internship experience I feel very confident that I'll be a top performing analyst in my group so I'm less worried about the risk of being a known commodity.

You mentioned waiting until the second year to recruit makes sense in almost all but a few exceptions (while it seems like other people here recommend the opposite and are saying to just go for it my first year). Would you mind expanding on what the exceptions would be that would make you recommend recruiting in the first year instead of my second year?

The main reason I'd want to recruit my first year is to avoid having to do 3 years in banking (and allow me the potential to do 3 years in PE instead of 2). Is that a good enough reason to go through recruiting my first year or do you still recommend waiting until 2nd year?

Keep in mind my stats:
Mid-tier bank (top group) in New York
GMAT 740+
GPA almost 4.0 but from a non-target state school
Shooting for a nationally known, branded buyout shop working with companies 150 - 500 EV.

May 7, 2019

Stats are fine, saw them in your other responses. No one will care that you went to a lesser known school if you have a good rep and perform well in interviews. It could be a reason for people to further doubt you if you give them a reason to knock you slightly in interviews, but that's about it.

I didn't make a specific recommendation, just said that it made sense to recruit in second year given timing of recruiting cycle nowadays. Most kids haven't experienced much on the job and will not have been in the environment long enough to articulate their limited experiences in a way that comes off as polished. If you feel ready to go once you hit the desk as a first year, or soon thereafter, then go for it.

The exceptions I was referring to are those folks who did business undergrad at places like Wharton/Ivey, were in business fraternities, had multiple finance internships... basically, people who won't have much of a steep learning curve in banking before getting really good. If you are exceptionally diligent during your first 1-2 months in banking and have experience to build from then you should be good to go. Interviewers adjust their standards accordingly if they're at all respectful - just need to show that you're smart, willing to learn, and as knowledgeable as you can be based on your experiences at time of recruiting

    • 3
May 7, 2019

And yes, it's a good enough reason to go through with recruiting first year. But all depends on how ready you feel, so balance your feelings there (and the knowledge that you only start from a blank slate in interviews once - tough to go through a second time) with how badly you want to do only two years of banking

May 8, 2019

Similar stats as you, I'm curious what you heard about the downsides of recruiting a 2nd year? Also, if you decide to recruit first year, what are you doing to prep? Very low visibility on this process especially as it keeps moving up, would help to know what others are doing. Additionally, has anyone heard if having a closed deal matters since we'd recruit so early as 1st years?

Also, I heard that recruiting as a 2nd year isn't bad. Many places, including MFs, have open spots for you to join one year later so you wouldn't have to do a 3rd year if you play your cards right (leverage offers to get one that has open spots).

May 8, 2019

Well I've heard that you definitely don't need a closed deal for first year on-cycle since I'd be basically impossible to see a full deal through. I've also heard that you don't even need to be the go to analyst on the deal you were on. Like some banks will have super new first years working with a second year on a deal (so you might not be building the model or whatever but you might be doing diligence tracking or maybe slight updates to the model or whatever. I've heard they mostly just grill you on like supporting details around the deal and your opinion on hypothetical stuff related to the deal, and less about like what exactly did you do for this deal.

The downsides I've heard are that although it's possible to get a spot 1 year out it's more uncommon, I've also heard some people say that if you wait til the second year some firms might think you're not as set on PE as if you went through the first cycle. Also I've heard some people say that if you go through your second year some places might assume you struck out your first year (even if it's not true). Lastly, I've hard that people who recruit there second year will be grilled a lot more on their deals and the actual work they did since you actually do have a full year of experience.

As far as prep, I'm mostly just going to know all the PE guides in and out, learn to build scratch LBOs, do a ton of prep work to think of all possible questions relating to my deals from last summer and for this fall, try to improve my mental health and lower interviewing anxiety, read finance news a bit more / follow a couple good LBO target stocks. I'd love to hear what anyone else is doing and if there's any other advice on PE prep for 1st years.

Most Helpful
May 8, 2019

I work at a MF as a senior associate and have been heavily involved with recruiting over the past few years, so can shed some light on these questions.

Having a closed deal doesn't matter. If you have something significant on your resume 1-2 months into banking, no one will be particularly impressed because they'll assume that you were only contributing in the most basic ways possible (which will be the truth, in all likelihood). As banker2018 mentioned, you will be expected to be able to talk about the deal if it's on your resume, though it's less about testing for technical knowledge and more about gauging intellectual curiosity. Instead of thinking about it as a challenge you have to deal with, think about it as an opportunity to drive the conversation in a way that's more natural than talking about something super vaguely.

On second year recruiting, short answer is that there shouldn't be any downsides to recruiting as a second year. As a general point, most people won't even notice that you're a second year prior to speaking to you during the interview. The only way people would be able to tell beforehand is by looking at the dates on your resume and realizing how much time has passed since you joined the bank, and most folks will simply miss that detail since they're not looking that closely. It's not like everyone is reviewing resumes and placing the second years in a different bucket for the purpose of approaching the interview differently; come interview day, every candidate will be lumped together into one big group.

To address some of the other things banker2018 brought up:

The only reason why it's more uncommon for second years to get offers in PE is because there are simply fewer of them recruiting. Most banking analysts choose to recruit as first years.

No one is going to dock you points for being a second year; as long as you didn't interview at the same firm the year before, the working assumption is not that you struck out the previous year. Rather, it's that you had a reason for not going through with recruiting during your first year, and that reason doesn't even have to be particularly compelling.

If you didn't come from a finance undergrad and just didn't feel ready to recruit during your first year, then that's perfectly okay and can even come off as positive if it's articulated the right way since it demonstrates self-awareness. The PE recruiting process happens so early nowadays that 99% of people will tell you that this is completely reasonable.

You could even say that you weren't sure that you were interested in PE and that you wanted to do more research before jumping into the next step of your career. You'll have to explain what made you interested in the meantime, but even that explanation doesn't require some sort of cathartic moment in order to be convincing. If you can spin it in a way that makes it sound as though you didn't want to follow the herd mentality, then you could be perceived as being thoughtful and prudent.

As I said, I played a big role in recruiting over the past few years, and we interviewed two second years who explained why they didn't recruit using the exact examples I described above. They were both hired as associates in the same cycle, and it wasn't even a debate about whether they should get offers.

Point is that if you recruit as a second year, you have the opportunity to come off as more polished, knowledgeable, etc. since you'll have one more year of experience than the majority of the other candidates being interviewed that day. If you have trouble doing that, then you probably aren't a good candidate to begin with since those types of things should naturally develop over your first year if you're even remotely engaged in what you're doing (vs. just going through the motions).

Only downside is personal - you'll have to do an extra year of banking, but that's a sacrifice that I view as worth it if the extra year upfront will allow you to be more successful in the recruiting process during your second year.

    • 6
May 8, 2019

Thanks for the perspective on this! I know you're finishing up your PE gig and that recruiting was much later when you went through it, but did you recruit your first or second year? Could you quick run down why you personally decided to recruit when you did?

May 15, 2019

OP - stumbled upon this and figured I'd leave a (hopefully) helpful comment.

In case helpful, of the names you listed, Amity covers Harvest (Amity is mostly NY except for Bain Cap). Note that Ratio may have poached some clients when they spun out of Amity.

If I remember correctly, CPI covers MDP.

Dynamic Search Partners covers GTCR.

Oxbridge covers Jordan Co.

Anyways, if you are truly interested in GTCR / MDP, I'd make sure to network with them (find an alum or a friend or reach out over linkedin). Those midwesterners care a lot about your willingness/happiness to relocate to Chicago. Good to talk about any ties you have (family/school/gf/fiance or whatever). Agree with above comments that MFs will move first (as inevitably happens every year), but some of these non NYC firms also hav moved very quickly in the past (e.g. flew in candidates as soon as news got out and gave offers after one round / no models). So be ready to commit.

Lastly, honestly sounds like you are open to anything. Some of the firms you listed have very different styles of investing. I'd not put GTCR in the same category as HIG for example. Good to cast a wide net, but understand the distinctions so when decision time comes you can leave or take offers.

    • 1
May 15, 2019

Thanks that's super helpful! You're correct that I'm very open to almost anything that is doing decent size MM buyouts (and I have a take what I can get mentality as well) but I would like to learn more about the distinctions between different firms that have similar investment criteria.

How would you advise learning about the more subtle differences between MM firms? Their websites always have the same general PE bs so it's not like I can use their firm website to find info on what makes their firm unique.

Do you think I should just try to reach out to associates at these firms? I feel confident that if I had a 20 min conversation with 1 associate at each firm I'd ask good enough questions to get a feel for the shop, but I've also heard that you don't really network with people during PE recruiting (you just use headhunters). Is it appropriate to network with these guys before I even start IB / during training or should I wait until I'm on the job in like August? With on-cycle so early these days I just want to give myself enough time.

Thanks for the advice!

May 15, 2019