How to tell the prestige of LMM or MM PE firms?
Hello all!
I am currently interviewing for multiple LMM and MM firms (Undergrad Internship) and I was wondering how I can assess the quality of a mid-market shop. I feel like there's a group of huge PE firms that everyone knows and can assess the quality of, but then a ton of MM PE shops that do not have real ranking systems. I am aware of the importance of things such as:
- aum
- recent deals
- strategy
- # of ppl
- deal flow
But I feel like this isn't that informative, especially since LMM and MM firms do not have a wide range of AUM and generally all have 10-40 employees, etc. Is there anything I am missing, or how can I possibly assess the exit opportunities to B-school or career progression in any manner.
One informal way to do it could be to look up associate alumni of the firm on LinkedIn and see where they went after their stint
Oh man - can't believe I forgot about that one, good point. Thanks.
No worries. Also for an undergraduate internship, I wouldn't worry too much about relative prestige between these firms. At this stage of your career, generally speaking, the quality of the PE firm won't really reflect either positively or negatively on you personally. Once you reach the point where you have multiple offers in hand, I would focus more on how you connected with the individuals you met with, the overall culture, how much responsibility you think you'll be given as an intern, etc. Unless you're choosing between a 2 man shop and a 40 man shop, I think that is probably going to be the more important calculus than prestige, at least when it comes to a MM fund.
Where the leaders have worked before
Lots of places where the partners have impressive backgrounds.
Ask people (i-bankers, lenders, etc.) for their opinion or anecdotal experiences with the shops.
^ this is the correct response. Where partners hailed from or where junior professionals move on to might signal the performance/brand of the fund but won't tell the whole story. Ask LPs (the people who ACTUALLY invest in the fund and have information access), lenders, and to the extent you can find a connection, portfolio company CEOs. There are many very reputable LMM/MM shops that are highly sought after for by LPs as well as larger PE firms looking to build relationships with their portfolio companies ahead of an eventual exit/transaction.
Chiming in late but I think it would be difficult for an undergrad to get in touch with LP's, nevermind mentioning how off putting it would be to have a college kid calling me at CALPERs and asking about the prestige of a fund I've invested into and monitored... Portfolio company CEO's?? No way.. If one of my portfolio companies called about a prospective intern asking about the prestige of my firm I would be weirded out.
I know you're a student so obviously lack the exposure to understand some of these dynamics, but PE firms don't build relationships ahead of exits. They are built and maintained over the life of the investment. I talk to the corp. guys at my portco's at least once per week. Sorry but this advice would not yield a good result and there are way less absurd ways to due diligence a fund as a student.
Look at where other junior IP's have gone. Latest fundraise press release (over sub. / under sub). Deal activity. Partner track record. IP bios that jump off the paper. None of that requires annoying the investors and portco's...
Prestigious MMs (Originally Posted: 10/05/2009)
What are the most prestigious MMs? I would imagine Houlihan and Jefferies would be on the list.
I would say Jefferies definitely, now that they have acquired the healthcare group from UBS. If you work there though, I'd hope you like healthcare since it pretty much dominates the bank.
A lot of MMs are only good at their own niche industries so it can be debatable.
...there's no such thing as "prestige" when it comes to middle market banking.
Houlihan and Jefferies are both good shops. Just don't go in to either thinking you're going to be doing name-brand deals...go in to get paid and get some solid business experience.
If you are in Jefferies Healthcare or HLHZ RX you will definitely be doing some name brand deals
If you can get access to pitchbook/preqin, returns on recent funds is an obvious place to go once the LinkedIn search suggested above is complete.
You are interviewing for an internship and you care about prestige? Calm down.
:p
Agreed, I used to work at a LMM FoF and I saw some lowkey guys with like 250M per fund absolutely killing it. Im talking like 40% IRR for the entire fund. They choose not to grow their fund to stay in their respective niche and keep crushing it.
Yes, much easier to get good IRR when managing less money and strategies rarely scale cleanly. You can also get away with some pretty nice fee structures in LMM...
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