IB Good Exits - Not so much

https://www.efinancialcareers.com/news/2021/05/banking-to-private-equity-promised-land

Good article from efinancialcareers this week on the perils of joining PE

Once you arrive in the promised land of private equity, things aren't what they expected. Oops, the hours are just as bad as at Big Bank of the Universe or the Boutique Bank of M&A, and there are years of long hours and basic salary and bonus ahead of them before any prospect of equity ownership in the form of carried interest.

But what do you do when you've skipped to the exit option, and then you want to exit that too? Pre-pandemic, I met with a graduate of a name-brand New England prep school, Ivy League college, near-Olympic-class athlete, who had gone from two years at Goldman Sachs to one of the big four U.S. private equity firms (KKR, Apollo, Blackstone or Carlyle). He quit his private equity job after less than a year because the working hours and lifestyle were no better, and he had no equity in deals. 

Maybe he shouldn't have expected carried interest going in. But he would look at how much revenue the PE firm expected to generate from a deal he worked on (perhaps $400 million over the course of owning the company) and compare that to his few hundred thousand dollars a year in salary and bonus, and feel short-changed.  

After a year or so, he left to sell real estate and tried to pick up one-off finder's fees from introducing companies to start-up PE or VC firms run by peers of recent MBA graduates. I don't know how he's done since the pandemic, but it seemed like a better bet than climbing the long ladder in private equity.

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Comments (19)

  • Analyst 1 in AM - Equities
May 27, 2021 - 10:57am

people in ib/pe delude themselves into thinking they will have golden exits no matter what to justify the hours and horrible lifestyle. Reality is that PM's (product, not HF), or MBB consultants at the mid-junior levels have much more optionality than someone working MM PE if they choose to exit. 

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May 27, 2021 - 11:17am

What? And make 15% of your paltry 80 grand salary to make 100k all in first year @ McKinsey? No thanks. You seen the payscales for MBB? The delta is massive between IB and MBB at every level. I'd rather give up optionality for $$$. PM on the other hand though...

Array

  • Associate 3 in HF - EquityHedge
May 28, 2021 - 11:29am

How much do product managers at a big tech make, coming out of MBA? Have heard 150k-200k thrown around but that sounded low to me, given what they do.

Actually I should rephrase - given what they have to do (a large portion of which seems to be a glorified secretary) I would really want a lot more than 150k-200k out of MBA to do that job.

May 28, 2021 - 2:20am

Getting into and performing in a high finance role is no joke from day 1 to when you decide it's not for you. Working at an investment bank then a PE firm takes it's toll and you need to either be well connected or an absolute beast to stay in either and advance through the ranks. That's why you see mostly industry exits after PE (either something completely separate from the firm or a portco role). The reason the IB exit is so coveted though is the optionality it presents. Having a couple years of banking and a couple years of PE really lends itself to your benefit as a ton of opportunities you may not have had without those roles open up. If you're not looking to stay and live the grindy life, doing the "routine" high finance steps gives your resume the boost and credibility which you need to get to those chiller jobs in industry or whatever it is after you're done. It's really a trade-off and a question of how much value you place on your future opps rather than the short-term shit you have to go through in these roles.

Just my two cents but I've seen people usually fall into the buckets of either doing high finance for either the opportunity to move up the ranks or use it as a jump-off for something better they wouldn't have gotten otherwise.

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  • Analyst 1 in IB-M&A
May 31, 2021 - 9:16pm

Bruh if you don't like IB/PE you can leave and do Corporate Finance at any time, or probably consulting or probably a variety of other business functions. We aren't gonna act like most people who started in IB are selling insurance 10 years out from their debut on the street lol.

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