I'm a VP in MM PE, ask me anything

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I'm a VP in MM PE, ask me anything. Interview prep questions, industry questions, etc. etc.

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Comments (165)

Aug 15, 2016

As a rising Junior looking to get into PE and beginning to apply for 2017 SA positions, what's the best route to take? IB for a few years then apply to PE funds? Try to start in a PE shop?

Also, what are your plans for the future? Looking to stick with your company and be promoted within, or move laterally, or out of PE completely?

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Aug 24, 2016

Definitely do banking. I would target large banks like Goldman or JPM, or top tier middle market shops like BlackArch, Houlihan, Harris Williams, Lazard MM, etc.

Experience is more important than pedigree when it comes to lower middle market PE recruiting. So I would go where you think you will get the best experience and deal repetitions.

I would argue MM PE is more fun and a better lifestyle than mega funds like KKR, Warburg, etc. I would also make a case for secondary markets like Charlotte, Denver, Austin, Dallas, etc. Typically great hours and low cost of living.

I am on a partner track with carry so I don't plan on leaving anytime soon.

Aug 15, 2016

How about firms like Jefferies and William Blair for MM? A few alumni from my school work/worked at these banks and other MM firms and have seemed to do pretty well.

Aug 24, 2016

Yes those are both great shops.

Mar 30, 2017

How about RBC? They've cracked top 10 on league tables in IB recently

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Aug 25, 2017

Did you type this yourself, or let the HR rep from their corporate presentation log onto your WSO for a minute?

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Aug 24, 2016

.

Array

Jul 6, 2018

Sounds like you might be from Charlotte given your response. I am currently at a B.B. in nyc but looking at moving to a bank in Charlotte simply because I miss that city. Long term want to work in PE of some sort of really interesting activist alt in Charlotte. What's the recomendation, how will it look moving to wells / Lazard mm / blackarch,

Oct 4, 2018

BlackArch? What are your thoughts on BlackArch Partners?

Aug 11, 2017

Well I mean the best route to take is go straight to Blackstone PE

But the easier route to take is banking

Aug 15, 2016

Thanks for doing this. To get things started, here's my quick list of questions for ya:

1) What is your firm's industry focus?
2) Would you consider your team top-heavy? If so, how do you maneuver your path up the ladder? I suspect that senior folks with little value add will firmly defend their position, negatively affecting mentorship as you rise up.
3) How much sourcing do you do?
4) At that level, do you feel pigeon holed in the industry focus of your firm?
5) When you look at new junior hires, is there a clear preference for IB or PE analysts?

Aug 24, 2016
  1. Generalist with a heavy weighting in healthcare, tech, and business services
  2. No, it isn't top heavy. Its actually a very good dynamic. This is why I recommend people looking for a long term stay actually seek smaller funds with smaller teams. Better chance to get a bigger slice of the pie.
  3. Zero. We have a deal origination team that does that.
  4. No, I can do anything I want in terms of industry focus--another benefit of being at a smaller shop.
  5. If I could have my pick with would be someone with PE experience so I can just plug them in with little training
Mar 29, 2017

Does the deal origination team work separately to the Investment teams? As a deal originator, I wonder if it's more about that persons Business Development/Networking/Cold calling ability compared to the person needing to know how to build DCF and lbo models.

What does a deal origination team person get paid usually?

Aug 15, 2016

What's your take on networking with kids at small boutique shops looking for more steady experiences at an MM boutique?

Aug 24, 2016

Not sure what you mean here--network with everyone you can, PE is a small industry. I would agree that there are more long term opportunities as smaller funds about to raise their first big fund (i.e. fund III or fund IV) than a firm that is already top heavy and have their 8th fund.

Aug 15, 2016

Thank you for the response. But I mean in general, what is typical about someone trying to make the jump from small shop to MM is that they might be very ambitious. Like, I'm at a small boutique now in IB but want to keep the boutique experience, just at an MM shop. Obvious that I might not be very loyal or would you care?

Aug 24, 2016

Wouldn't care. Everyone in this industry is ambitious.

Aug 15, 2016

How do you see the future of MM PE as an asset class playing out? I've heard that increased competition is making it harder to financially engineer the home runs that were seen in the past. To what extent do you think this is true? Are operational improvements becoming more important? Do you believe this will lead to a winner take all mentality where funds will increasingly be allocated only to the strongest performers?

Aug 24, 2016

Just the opposite. There is a ton of capital that needs to get put to work and that is driving up competition and purchase prices. There are a lot of guys doing independent sponsor deals now and raising equity deal by deal. I think overall returns will go lower but relative performance distribution curves will stay the same.

Aug 15, 2016

Thanks for doing this. I have two questions:

-Assuming a candidate does well on the case study portion of an interview, what are the next steps in the process?
-What does comp look like for a pre-MBA associate coming out of investment banking, and how is the split between base/bonus?

Obviously all firms are different, but I appreciate any insight you can offer. Thanks.

Aug 24, 2016

Every firm is different. Some start with fit and then go to technicals. Others go the other way around. Some processes take weeks and others take hours.

Depends on the firm size; for lower MM PE, I think ~225-250k all in for a pre-MBA associate is about right, with $125k base.

Aug 15, 2016

What was your undergrad background (target/non-target), and do you think that had any effect on your PE recruiting (assuming you did IB -> PE)?

Aug 15, 2016

interested in this as well

Aug 24, 2016

No i was very non-traditional and it really isn't even worth discussing my past on this thread as it will probably just create a lot of false hope. You can find other threads where I already told my story:
http://www.wallstreetoasis.com/forums/ask-me-anyth...

Aug 15, 2016

Is it possible to go straight into MM PE, coming from HYP, SA experience at EB, and connection to the firm? If so, do you recommend over BB lifestyle?

Thanks

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Aug 24, 2016

Banking life sucks, but basically any job right out of college is going to suck, especially any PE firm that will hire you right out of undergrad. There are PE firms that hire undergrads (Audax and Bain Cap do it), but it is ultra competitive.

Aug 15, 2016

Thanks :)

Aug 15, 2016

+SB, thanks for taking the time to do this. Couple questions for you:

  1. What would you say differentiates a pre-MBA associates from the rest of his/her class?
  2. What is the biggest adjustment you have to make if you're fortunate enough to make the jump from a pre-MBA associate to a VP someday?
  3. What advice would you give someone about to begin their MM PE stint as a pre-MBA associate?
Aug 24, 2016
  1. Attention to detail, having flawless work, and thinking and offering ideas on investments and not just being a model monkey; also being able to get to the answer efficiently and quickly and really being thoughtful in messaging so you can better influence people (like in investment committee)
  2. There really isn't an adjustment; you just get better at your job and can do stuff more efficiently. Rather than worrying about minor details you can boil down the main issues of an investment very quickly and focus on what matters. You also pick up lessons as you start to do multiple deals in the same industry space.
  3. Work your ass off and realize you are still short term, so treat it as a sprint and not a marathon; go all the way, work your ass off, and don't make any excuses. Sacrifice short term life for long term gain. VP life is pretty nice.
Aug 15, 2016

+1

Thanks for doing this.

What's the recruiting process like for current MBA student with a finance background?

For instance, mine is more of an REPE and VC than the traditional PE.

Thanks again

Aug 24, 2016

As someone who just graduated from a top MBA, I can tell you its a fucking blood bath. Like 20 guys with pre-MBA PE experience for every job. I HIGHLY recommend to looking outside of just NYC/SF/BOS. There are small shops popping up, get in there if you can.

Most guys I knew went back to their old fund (even if they didn't like it) because it was their only way to get back into PE.

Aug 15, 2016

Two questions.
1) Are you settled / ready to settle down in life? I feel like most VPs are at the age where they get kids and decide they are going to stick with the same firm for a while. Follow up, if you are settled on staying do you know if you have a shot at making partner?

2) I have a case study for a MM PE firm this week. Received the company that they brought public to private a few years ago and they want me to present them the investment thesis (Company overview, industry, valuation models and bottles, etc.). My presentation is done and I am presenting tomorrow any last minute tips?

Edit: Forgot to say thanks for doing this!

Aug 24, 2016
  1. Yes and yes
  2. Don't fuck it up ;)
Aug 15, 2016

Some market commentary - what is your average deal size and range; what are multiples at for the type/quality of businesses you're looking at trading for; activity - busy/slow year so far.

What are some of the most salient things you like to hear about or discuss when looking at potential associates about their deal experience (in my case direct PE experience in an exceptional lean team, but also more generally for those in banking without principal investing experience.)

How greatly do you value PE vs IB experience pre/post MBA depending on if you're looking at fresh associates or interviewing seniors/jr. VP

Aug 24, 2016
  1. average deal size is around a 20-30mm equity check, with leverage probably more like 50-60mm total. we only look at healthy growing businesses with cashflow; typical mutiples are 6-12x range
  2. honestly, its repetitions that matter. if I know you did at least 2-3 deals as an associate I know I can drop you into one of my deals and not worry about you falling behind.
  3. see #2--pe experience is the biggest thing. I dont care if you did banking as long as you can do a deal. banking is just the best way to break in.
Aug 16, 2016

6-12x returns are typical? That's insane. God bless America.

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Aug 16, 2016

buying multiples (ie. they buy business at 6-12x EBITDA), not returns....

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Aug 24, 2016

No that is multiples paid. Returns are 2-3x.

Aug 16, 2016

Got it. Misread.

Aug 19, 2016
coolhandlucas:

6-12x returns are typical? That's insane. God bless America.

You aren't getting 6x-12x returns with Obozo in office. He's set the stage for the upcoming doozy of a recession with all his failed policies.

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Aug 20, 2016

Not unless you somehow squeeze your way into a participating preferred with 10% PIK in a series alongside the CEO in a hypergrowth tech company - I've seen some interesting mgmt cases for those ;)

Aug 15, 2016

thanks for taking the time to do the ama!

WSO's COO (Chief Operating Orangutan) | My Linkedin

Aug 15, 2016

Thanks for doing this!

Any advice for an undergrad that's about to start a private equity analyst role? Should I sharpen my modeling skills?

Aug 24, 2016

Yes, get really good at excel. Take WSP or BIWS. But more than anything listen, work hard, and think before acting. Attention to detail is very important.

Aug 15, 2016

I've known a couple guys that jumped from sell-side ER to PE. Ever come across people with an ER background?

Aug 24, 2016

I have not

Aug 15, 2016

Thanks for doing this AMA! Always much appreciated. I just have a couple of questions.

  1. Can you give an approximate timeline of the private equity recruiting process for MM and
    Megafunds?
  2. Can you explain what the culture is like among the different companies in the sell-side and buyside?
    I hear a lot of rhetoric about this, but it'd be great to hear a more straight-forward
    interpretation.
  3. Relatively, how important is deal experience vs. Analyst ranking? In terms of deal experience,
    are you looking more for size of deals, number, complexity, or a very involved role?
  4. Do you have any advice for managing the private equity recruiting process?

Contra omnes dissident

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Aug 24, 2016
  1. I honestly cant speak to that. I know that is all over this site though. It is m understanding the pre-MBA recruiting is getting earlier in the year as firms try to get the jump on fresh IB talent
  2. I'm sorry but that is too broad of a question. Every firm is different. If you have a specific firm in question I suggest you use your alumni and linkedin network to find someone and ask them.
  3. I think it depends more on the competitiveness of the PE firm. Like KKR and Blackstone will probably only look for the top analysts at the top banks, and will recruit so early in the process that they are making bets on futures rather than making assessments based on actual deal resume fodder. Smaller firms will probably rely more on deal experience. At the end of the day those are all things that get your foot in the door. No matter what what have to perform in the interview. And the interviews will range from fit, cases, modeling tests, resume walk throughs and past deal discussions.
  4. Pre-MBA I think the key is casting a wide net and getting to know all the headhunters like oxbridge, CPI, etc. After that you have to survive the meat grinder of interviews. Post MBA a lot of it is a lot of networking on top of the headhunters.
Aug 15, 2016

What are your daily responsibilities as a vp?

Aug 24, 2016

Varies by firm, but my role is largely process management, thesis development (e.g. IC memo writing), modeling, and primary due diligence. We have a robust portfolio ops group so its mostly deal closing related.

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Sep 17, 2016

delete

Aug 24, 2016

I don't know what a grad scheme is. If you want to discuss more PM me.

Aug 20, 2016

$6bn AUM is not small, IMO

Aug 15, 2016

Small regional? 6bn$ is a big deal. I feel like WSO has this BB IBD / MF PE or go bust mentality. There are many firms that manage smaller amounts that are absolutely killing it.

Aug 15, 2016

Thanks for doing this - 3 technology related questions

What technology/software do you use day to day? Bloomberg, CapIQ, Pitchbook, etc...
What sort of data do you look at when making decisions?
What sort of data/information would be useful to you that you don't have now?

WSO Vice President, Data
@JustinDDuBois

Aug 24, 2016
  1. CapIQ mostly
  2. Market share and growth data, company financial data, customer churn and concentration trends, return on net assets
  3. Sorry this is too general of a question, not sure what you mean.
Aug 15, 2016
  1. Alluding to your earlier answer, what do most top MBA students with pre-MBA PE exp do after graduation if they don't get a post-mba job?
  2. What would you view as a "better' pre-mba experience that would set someone up for a successful PE career - growth equity / sourcing type funds vs. traditional MM LBO shops?
  3. What interview prep process would you recommend for current analysts planning on recruiting this winter/spring?
  4. Often hear that even though PE firms recruit IB analysts and consultants at jr level, the skillset required to be successful in each respective field is very different. What "type" of a person/analyst would be better off in PE long term versus IB or consulting?
Aug 24, 2016
  1. Anything they want, they are masters of the universe. But seriously--anything and everything. Search funds, start ups, F500, consulting, banking. They and human beings with student debt. They do what they have to to pay the bills.
  2. Traditional MM LBO; it is more applicable experience
  3. Network with alumni friends in PE and have them grill you on your deal experience. Practice doing quick 10 minute lbo models--like super simple cashflow debt payoff models and returns. Think about the key thesis/risk points of the deals you are listing on your resume.
  4. I never heard that. Banking (particularly roles that deal with selling deals to PE firms) is probably better prep for PE. Consulting (particulalry top shops like M/B/B/LEK/Parthenon and is still very good.
Aug 15, 2016

From your experience have you seen any post-MBA corporate development guys make the transition to the PE?

Aug 16, 2016

interested in this as well. Few guys from my corp strat/dev team joined tiny PE shops

Aug 24, 2016

I haven't personally. But I am sure there is a unicorn out there.

Aug 15, 2016

How long is a final investment memo at your firm?
(how detailed does it get?)

To determine valuation, does your firm build upon the model that the management or seller or sell side investment bank provided or do you guys build your own model from scratch?

Aug 24, 2016

50-100 pages (including tables and charts); we focus on the key thesis points and they key analyses to back up those points

We always build our own models from scratch.

Aug 15, 2016

This is really helpful, thanks a lot for doing this. What are yout thoughts on transitioning into MM PE after spending time at a hedge fund (post-two year IBD stint)? I'm an analyst at a hedge fund, but I don't particularly enjoy it and I think I would enjoy PE much more. When would it be better to make this move - pre or post-MBA? Any tips for what you would look for in a HF candidate vs. someone that did a few years of PE instead?

Array
Aug 24, 2016

I get the sense most people think PE is more fun and easier than HF life. This is from my own first hand accounts of talking to people who have done both. Your decisions are marked to market every few years instead of every day at 5pm. There are a lot less PE jobs than HF jobs out there. I think the sooner you can make the transition the better.

Aug 15, 2016

Good to hear that I'm not alone in feeling this way. Any advice to somebody looking to make the switch? Skills or experiences to highlight or a good way to frame my story? Assuming I can't find something in the next year or so, how difficult would the move be post-MBA?

Array
Aug 16, 2016

Thanks a lot for doing this.

  1. Have you come across people successfully making the switch from PE secondaries to a direct investing PE?
  2. What steps can one take to better position themselves for direct investing roles should one come from a secondary background?

Background: I hadn't done investment banking previously.

Aug 24, 2016
  1. I have not personally
  2. I think you have two paths: try to directly recruit for a fund that is smaller and willing to give you a shot, or get a top MBA and still look for a smaller fund willing to give you a shot.
Aug 16, 2016
MPG:

1. I have not personally2. I think you have two paths: try to directly recruit for a fund that is smaller and willing to give you a shot, or get a top MBA and still look for a smaller fund willing to give you a shot.

Thanks alot for the advice. Suppose you were to interview someone from a PE secondaries background. What would you view as the disadvantages/weaknesses of recruiting such a candidate?

Would like to know the interviewers perspective so that I can better prep for it. Thanks once again.

Aug 16, 2016

Thanks for doing this. Had a few questions to safely ask under the cloak of anonymity (I am a senior associate at one of the top-tier MM shops you mentioned earlier on).

  1. How often does your firm use investment banks (for sellsides) and what criteria would you think is most important in selecting an advisor? How closely do you look at the entire team, vs. a bank's reputation/capabilities or MD track record?
  2. What has a junior/mid-level banker ever done specifically that has really impressed you or caught your attention on a deal? (or conversely, what could they do)
  3. Do you maintain professional relationships with bankers (specifically mid-level/VP-types) and how have those developed (outside of working on a deal together), especially in light of the fact that you don't meaningfully participate in any sourcing activities (we do a lot of buyside/"idea generation" books for PE clients).

Thanks again.

Aug 24, 2016
  1. All the time, we don't sell our own companies. We would likely have multiple banks come pitch based on industry expertise and relationships and then choose one based on how they show.
  2. Frankly, they know their shit cold and are generally in tune with the market
  3. I keep a rolodex of guys at my level and above my level. Every deal I look at I keep in touch because its a small world and they might be able to help in the future.
Aug 16, 2016

What advice would you give 20 y/o you

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Best Response
Aug 24, 2016

Work out more you fat fuck.

Aug 16, 2016

Appreciate you taking the time to answer some questions. What advice would you have for a CPA with around two years of Big 4 FDD experience (+three years of audit) looking to go in-house at a fund? Certainly front office would be the dream, but I'm also not delusional and I'm likely too old to go to go back and "start over" at a bank. Do in-house due diligence or portfolio monitoring groups exist in MM shops, or is it mainly the mega PEs that have those sorts of roles? I'm pretty cognizant of the fact that I have a certain skillset, and the PE firms prefer to outsource that skillset to the Big 4 / A&M, etc.

My client base is largely MM PE shops and we have a pretty collaborative relationship with the front office team during the deal process. This is a nice contrast to some of the mega PEs and large strategic buyers who see us more as a check-the-box to crank out a report for their lenders.

Aug 24, 2016

There are a number of shops with in house portfolio groups that hire big 4 guys. You don't need an MBA to recruit for those jobs. These opportunities exist. PM me if you want to chat more about this.

Aug 16, 2016

Thank you for doing this.

What is your take on the value of MBA in the PE world. How critical it is for post-MBA people to have banking experience/do banking right after MBA to get into PE?

Aug 24, 2016

No it is not critical. It is purely optional. I did it because I wanted a 2 year break to assess what I wanted to do. I also was a nontraditional background, so the pedigree helped. If someone went to H/Y/P or Wharton undergrad and/or are already successfully at a PE shop that they like and can promote without an MBA, then I would recommend staying where you are.

Aug 16, 2016

HAHAHAHA did this VP guy just say fuck these stupid questions and kid and dip?

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Aug 24, 2016

Nope, just got busy on some stuff, I'll keep answering these as they come.

Aug 16, 2016

Thanks for the AMA, what do you see your peers at the VP level go and do if they leave PE? If you didn't want to stay in PE what would be the thing you would look at doing?

Aug 24, 2016

Search funds, fundless sponsor deals, portfolio company management, start-ups, anything and everything. Talent is hard to come by in this market. if you are a smart guy in PE you can find work in whatever you want.

Aug 16, 2016

Thanks for doing this. When interviewing MBB consultants, how do you view them as opposed to bankers? What are your reservations in hiring a consultant over the traditional banker and what do you think are the pros?

Aug 24, 2016

I give them each an even weighting. I care more about ability to think critically. modeling can be learned (quickly).

Honestly, I know bankers and consultants that were both great and terrible, so I dont try to paint with a broad brush. If I had to pick a job to teach me the blocking and tackling of PE, I would choose banking just because it the most similar--but if someone worked for McKinsey I know they are smart and can learn fast.

Aug 15, 2016

I have a second question, you mentioned you have an origination team that does the sourcing. But do you know how the team sources, like what goes into it and how many of those deals actually land on your desk that meet your investment criteria? What type of deals get thrown away within this scope?

Aug 24, 2016

Every firm is different; my firm has a dedicated team to maintaining relationships with deal sources like investment banks and brokers, as well as working on proprietary deals that are not being shopped.. In terms of screening, we look for deals in a certain size range because we want to properly diversify the fund across a number of investments. You don't want to do too few deals because your taking on too much risk.. You don't want to do too small deals because you don't have the resources to manage so many portfolio companies.

Aug 17, 2016

Great insights, thanks for giving back so meaningfully. In an airport lounge after closing a deal, smiled reading through this whole thread. About to read your AMA from two years back that you linked in here.

Aug 17, 2016

Really great insights - thanks for doing this. You mentioned you were on a partner track with carry. One of the benefits that's often touted for MM over larger funds is the ability to get a more meaningful portion of the carry pool and do so sooner than at a MF. There are various industry comp reports out there, but most focus on larger funds/firms or on the total dollar value of carry over the fund's life, etc. I understand there are a lot of factors at play, but without getting into your personal situation - when do you think it's reasonable to expect carry and what percentage of the pool do you think is market (range) at different levels at a MM firm? How much does AUM/fund size and/or number of deal professionals impact this at MM firms?

Aug 24, 2016

I can speak to lower middle market--typically post-MBA partner track VPs start getting carry. For a +/-$1bn fund i could see that ranging from 0.5% to 1.5%, for smaller funds maybe a little more.

Aug 17, 2016

As a consultant from a tier 2 shop, who just landed an interview with a large MM shop, what is your foremost recommendation on how to prepare?

Aug 24, 2016

Know your technicals cold and be able to speak in depth about your client engagements and the business issues at hand, and how those issues you dealt with would be viewed from an investor's perspective.

Aug 17, 2016

I know there are a lot of folks, especially on this forum, that say that transitioning as a post-MBA Associate to PE is impossible. I recognize that it is much more difficult because there is no formalized recruiting at that level, however, can you speak to the recruiting process for post-MBA bankers/consultants?

Aug 24, 2016

Yes, its an unlikely path but it can happen. There is no process. I think frankly the best bet is to arbitrage by joining a PE firm that isn't top tier or large yet--like doing a fundless sponsor deal or a search fund deal, or getting in on the ground floor with a senior partner who is raising a fund. Or going to a city (like something in the midwest that isn't Chicago) that no one would want to go to.

Aug 17, 2016

@MPG Here's a question out of left field maybe. What kind of job can I get now, perhaps with training, while I improve my cv and background. Where do I find these jobs? Former medical student. I intend to do a certificate in finance from September to December. Then around that time get help setting up my LinkedIn. CFA I review course Jan to June? For June exam administration.
Perhaps MBA route into banking, ultimately
Am I thinking along the right lines?? If I had started in college knowing medicine wasn't right for me I could have been where you are now, right? Ha -zxcibgirl

Array

Aug 24, 2016

I am sorry, but I don't understand the question. You should seek a job the fulfills you and gives you an opportunity to continually learn and grow.

Aug 17, 2016

Also, since I am new at this industry, @MPG what are in your top 3 books I should read to get my information?
Thx -zxcibgirl

Array

Aug 24, 2016
Aug 17, 2016

Is there any hope at all coming from a non-IB/HF and getting into a MM PE shop? Or even something boutique? Wouldn't necessary be targeting NYC/BOS/SF.

Background being 2 years in corporate finance with some interesting and somewhat relevant positions (not to go into detail to keep anonymity).

Aug 24, 2016

You would have to have one hell of a non traditional background. Frankly the few guys I know that got in outside the normal path were Navy SEALs and Delta

Aug 17, 2016

Really appreciate the insight - feel like this side of the forum is relatively quiet compared to IB so fresh info is completely welcome! Anyways, I have a question regarding some (personal) next steps. I work at a MM tech shop, officially have a year under my belt, and am in a position where I need to critically evaluate what my next move is. My goal is to end up in a technology focused middle market buyside gig (typical LBO as well as Growth Equity), but I'm becoming increasingly worried about my deal experience. I put off recruiting a year after speaking to the usual headhunters, and decided that If I wanted to pursue the buyside from my shop I would have to get more deal experience and be able to crush interviews.

I just got my bonus, spoke to a headhunter again to catch up, and realized that after a year...I have almost nothing to show. I'm engaged on a $50M private placement in a sh** industry, and a pre-revenue 3D sell-side that likely won't even close in the single digits. I have one "fake" m&a deal I "closed" during my first 6 months where I joined on the tail end of the transaction, that would have actually been somewhat appealing, but because I joined so late, I didn't create the model/run much diligence/etc. I now just got staffed on an IPO lead left for a "data" company that is realistically an Ad Tech player (another sh** industry), have full responsibilities over model and roadshow pres, but its adtech.

Anyways, I'm beginning to feel trapped, and am worried that PE shops - regardless of how personable I am and that I can answer technicals/model - won't even give me the time of day because of the size/quality of my deals. My question to you is: what would you do in my situation? I'm not a prestige whore, but just want to work at a reputable buyside shop with smart coworkers, on interesting transactions. If I can talk intelligently on my deals, regardless of quality, can I be positioned competitively? Should I consider the big L (lateral)?

Much obliged my friend! apologies for the essay ^

Aug 24, 2016

I wish I had a magic bullet--perhaps go to business school and try to pivot? Even that probably wont work because you want have any deal experience. Did you skip banking? Maybe cut your losses and work for a tech focused bank and try again? If you are only 1 year out of college its not too late to start over.

Aug 18, 2016

What advice would you give a recent liberal arts graduate (majored in finance/economics) with experience in start up and working with buy side clients?

Aug 24, 2016

depends on what your goals are?

Aug 19, 2016

Outside of modeling and fit questions, what else gets tested in interviews? Are there any brain teasers, or market sizing questions?

Thanks!

Aug 24, 2016

Entry level pre-MBA roles I think get more teasers. If you are going for an experienced role it is more about knowing your resume cold and demonstrating the ability to assess a deal and see value.

Aug 19, 2016

What's your opinion on the Operations track of PE?

Aug 24, 2016

A worthy and necessary role within a PE firm where you can still make a lot of money build a career. Unfortunately, it is usually a role that is always focusing on the under performing portfolio companies and comes with a lot of headaches. Not for the faint of heart.

Aug 19, 2016

I am a software developer with around 4 yrs experience. I want to switch careers and work as an investment banker. I am trying to get into a top B-school. But, I am a female and 30. I am in Boston and open for Boston, NY and Chicago. Can I make it to investment banking post MBA considering I might be 34 and I am on work Visa.
Also considering I am a software developer, working for a Big 4 Auditing firm, what are my chances of getting into to Harvard, MIT, Booth, Northwestern, Columbia or Stern? I don't think I can make it to Wharton.

Aug 24, 2016

Its not too late. You can get a god MBA and get into banking at your age. Go for it.

Aug 19, 2016

Thank you for your time. You've responded to a lot of comments and we certainly appreciate the insight. What would be your suggestion to an employee of a mutual fund/ETF company hoping to move into private equity? With the right set of skills and some networking, is a direct move possible? Would you suggest experience in another industry first? Can you comment on the value of CFA/CAIA designations in PE candidates? Again, thanks for your time.

Aug 24, 2016

Unfortunately I can't comment on this. I can say that the CFA isnt really something people look for in PE. Going from a long-only fund to PE doesnt seem impossible, but I think would just be tough.

Aug 19, 2016

Thanks for doing this - what are your thoughts on the search fund path?

Aug 24, 2016

I think it is a GREAT opportunity for people to be entreprenurial and also break into the PE world. I would suggest partnering with someone who fills your resume gaps. If you are an operator, find a finance/PE guy. I would also suggesting funding your own search--dont raise money to pay for 2 years of searching. Just get a 30-40 hour a week job and spend your spare time searching. Finally, look into all types of funding. You don't have to raise from 30-40 investors. You could also partner with an SBIC mezz lender or fund investor that specifically back search funds. Look at guys like Peninsula Capital, Blue Sea Capital, Plexus Capital, Anacapa Partners, Search Fund Partners, Pacific Lake Partners, etc, etc.

Aug 24, 2016

Sorry for lack of responses the last few days. Will try to respond to these comments and PMs this week.

Aug 21, 2016

Thanks for doing the ama!

I'm still in highschool but am interested in finance as a career option but my whole family is engineering related as my dad owns a tech company. So I am kinda pressured into majoring in comp sci. Would it be viable to major in CS but break into banking or pe at some point? I plan on doing my mba at hopefully a top school if that matters. Sorry for any ignorance again, still dont know everything about the field.

Aug 21, 2016

You can do Computer Science and get into finance if you go to a target school. Just learn the technical interview question answers and make sure you keep up with the markets. The ideal route is to get into a BB bank ( JP Morgan, Goldman Sachs etcc) for their investment banking division. Make sure you do summer internships throughout university in related fields. it will make more sense if you read some of these forums. Essentially you want to break into investment banking first or at the very least, corporate finance at the big 4. Computer science is fine as long as it is a target school e.g. Oxbridge , LSE etc or wherever in the usa

Aug 24, 2016

Good on you for already thinking about your career. It is never too soon. I think you would be best served to take some sort of a technical degree--comp sci is a great example. That, or any engineering discipline, or math, or even a hard science. What you really want is something that makes you look like you are both smart and not looking for an easy degree. Next most important is to get top grades in college. FInally, get into the best school you can. The Ivies are worth the money if you can get in. Nothing wrong with a good state school if you can still be near the top of your class.

You can study for banking/consulting interviews regardless of your degree--so dont worry about being a business major.

Aug 21, 2016

Would you say doing a lot of PE work in consulting is favourable or not? Might learn the wrong methods, on the other hand it's experience

Aug 24, 2016

If you mean working at a place like LEK or Bain for a couple of years pre-MBA before trying for pre-MBA PE jobs? Yes, great experience.

Aug 21, 2016

I got my foot in the door of a PE firm as an intern, but it's not finance related. It's not the typical internship and I'll be there till the end of the year. I will be graduating next year with a major in finance. How (or is it even possible) to transition to an associate level position?

Aug 15, 2016

You sound like you could be partner material. About to graduate with an undergrad finance major, you're definitely ready.

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Aug 21, 2016

Why are most people on this site rude? Sarcasm is a nice thing when done nicely, you are just being a dick.

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Aug 15, 2016

Lol everyone wants to go from 'nobody' intern to rockstar associate when in college, myself included. The reality is its just not gonna happen. Would you rather catch the flack on an anonymous board or out there in the real thing when the bankers start circulating your emails/resume for a laugh?

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Aug 21, 2016

I just think people over exaggerate on here. I've worked in formal places, hedge funds ( as in intern) etc and everyone is pretty nice when you speak to them normally. I agree the question asking about being an associate is beyond stupid, but I suppose I just prefer constructive criticism when someone is trying to learn. Each to their own.

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Aug 22, 2016

Currently working in MM PE and applying to bschool. What was your reasoning on your applications for applying? Did you know you wanted to get back into the PE world after or did you make up a different excuse?

Aug 24, 2016

Dont bullshit the application. Just be honest---dont talk about how you want to save the world or create the next KIVA. Just be honest and say you want to rule the world on your PE throne and the 2 years will be a good party break. But seriously, just be honest. I can tell you this: if you are a white male and work in PE, unless you graduated top of your class and have a gold plated resume and worked at a top shop, you are not getting into H/S--maybe Wharton (which isn't the end of the world).

Aug 23, 2016

Thank you for doing this. it is much appreciated. I just finisched my MSc in business from a good (top) European business school. I had no experience before my MSc so I was only able to secure an internship at a Big4-TAS. My internship is over and I could either work FT here or switch to a good MM M&A boutique, but as an intern (6 months). My end goal is PE. Should I switch now or work FT and switch later? Any advice is welcome

Aug 24, 2016

Sorry I have no idea on this one.

Aug 15, 2016

Xyz

Aug 23, 2016

moving up-market doesnt happen all that much. 90% of the time it's MF guys moving down to upper mm / mm PE firms.

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Aug 24, 2016

I would challenge that you are making a mistake. You will never make it to the top of the mountain at a big fund like that. And the work isn't that fun. But here is the thing:: its really, really hard. I would say try to lateral and if that doesnt work try the MBA, but in either case you are talking like a 1% chance.

If you can just promote through at your current fund that might be your best bet.

Sep 1, 2016
MPG:

I would challenge that you are making a mistake. You will never make it to the top of the mountain at a big fund like that. And the work isn't that fun. But here is the thing:: its really, really hard. I would say try to lateral and if that doesnt work try the MBA, but in either case you are talking like a 1% chance.

If you can just promote through at your current fund that might be your best bet.

What about an analyst (came out of undergrad) at a MM firm? Would it still be just as difficult? Could one make the transition to associate at a MF? Would your advice about staying in MM be the same?

Thanks for doing this!

Aug 24, 2016

How will technology change the way things are done in the next 5-10 years?

What kind of technical skills , such as programming, would become necessary, and which will remain the most vital?

How is my grammar? Drop me a note with any errors you see!

Aug 24, 2016

No Idea.

Aug 24, 2016

Thank you for the AMA, very helpful!

What advice would you give to a consultant looking to get into PE? 4 years of experience, Big 4, worked on strategy and innovation projects for PE firms, banks, government entities, and startups. Thinking of MBA maybe in a few years but would rather try PE pre-MBA to see if it's something I want to pursue as a career.

I'm hoping my background will come off as "well-rounded" and that I'll be able to come off as someone who can learn fast / analyze businesses etc, but am worried about how I'll be able to compete against IB folks with a more closely-related skill set.

Aug 23, 2016

Your background isn't exactly what PE firms are looking for. PE firms value transaction experience which is why they like IB analysts. The firms that will look at consultants typically look at MBB and a few other boutiques.

Not saying it's impossible, but it would be extremely, extremely tough.

Aug 24, 2016

Yeah I could see that--your best bet will be to start networking with headhunters

Aug 25, 2016

How significant is the specific industry group you work in for MM banking as it relates to broader exit opps both for industry and PE?

Said another way, if you work MM IBD for a few years focused on only Consumer Products, will you still have good opportunities to join PE funds that aren't focused on Consumer Products or F500 companies outside of the Consumer space? Will your skills still be transferable and valued outside of your silo?

Aug 25, 2016

Thanks for doing this. Where do you see PE as an industry going in the future? I have a feeling it's starting to become more of an NAV business, with valuations going up, pipeline drying up, and returns going down. Curious to hear your stance on this.

Aug 24, 2016

Cant disagree with that.

Aug 25, 2016

Is it absolutely essential to be from an elite university if you are trying to get PE right out of undergrad. (if you are an ideal candidate, will the name brand of your school hold you back/not even get a foot in the door?)

How about for grad school, how much does name brand play in there?

Thanks

Aug 24, 2016

Yes in most cases. For MBA, its more about your pre-MBA experience. The guy with 3 years of PE deals and went to Booth will likely get the job over the guy with no experience and went to HBS.

Aug 25, 2016

Hello MPG,

  1. What color are your shoes?
  2. Coming from a non-target, what kind of networking is recommended? Should I go into something like Commercial Real Estate to learn how to structure deals or see if I can join a M&A shop doing analyst work and work up towards an Associate level?

Thanks!

Aug 24, 2016
  1. Who said I wear shoes?
  2. Just because you are a non target doesnt mean you cant land a banking gig; would just look for analyst roles and then look for PE interviews in a couple of years.
Aug 27, 2016

Thank you for doing this. I currently work at a BB firm in sales and trading. What have you seen as the best way to move into MM PE from sales and trading?

Aug 24, 2016

Sorry, I have no idea. Its a completely different animal. I would just recommend networking a lot.

Aug 29, 2016

MPG -- here is a non 'how do I get in' question for you if you decide to come back to this thread.

Do you add value to the firms you buy, and how? I'm assuming it's through your operations team. If so, then does the operations team actually help the company, i.e. install better inventory management systems, better accounting and forecasting systems, better customer management systems, hire new sales people, intro better governance, etc., or would you focus more on staff reduction/stripping the target? I've seen many shops focus on 1) Staff reduction/asset stripping and 2) Obtaining the cheapest leverage they can, usually targeting short-term plays. You could make an argument that these two categories can lead to value creation. In this case, the value creation appears to be itself limited, and confined to a very small group of individuals. The long-term value add to the portfolio company is questionable at best.

What's your take?

Thanks for doing the AMA. Don't give up -- come back :)

Aug 24, 2016

Thank you for not asking me how you can go from Janitor at P&G to working at Bain Capital.

The firm I am at doesn't look at cost cutting as the primary means to create value. The main levers that we typically employ involve building out better management teams (when needed--usually means a solid CFO). Growing the sales force, raising prices, expanding product lines, and doing Accretive add-on acquisitions. Investments and IT definitely if it is needed.

Aug 29, 2016

My man.

That's the kind of MM PE I can get behind.

Sep 1, 2016

@MPG

I'm curious how important portfolio company synergies are 1) in your investment process 2) in practice.

I see it a fair bit in my part of the world but would be curious to hear how, if at all, it impacts the MM space.

Sep 2, 2016

Hi MPG, great thread btw.

I had an interview today and towards the end got a little bit confused - the interviewer and me were going over the financials of a company in my country and we discussed the need for external financing and how it is bad for this company for 2 reasons - the obvious one being interest payments, and the second being the need to reveal the financial performance of the company to the banks who would need access to its financial information. I guess this would imply that it's a private company..? But then the interviewer asked me to search for it after the interview and send the name of the company to her once I find it.. but if it was a private company then I surely wouldn't be able to find the financial statements of it would I ? I'm starting to think it's a trick question.

Sep 7, 2016

MPG thanks for volunteering as I have a few questions regarding an lbo model.

  1. In an LBO deal, do we have to use the target's cash on hand as a source? Say if target has $2MM cash on it's BS and Sponsor is contributing $20MM in Equity, do we include the cash on hand as extra source or the Sponsor's equity includes the $2MM?
  2. A hypothetical deal has the following structure:

Sources:

RLOC $2MM
Term $20MM
Mez $10MM
Sponsor Equity $23MM (has a $7MM mgmt. rollover, but it's not included as a source)
Total = $55MM

Uses:

Base Purchase Price $50MM
Less: Rollover Amount ($7MM)
Plus: Estimated Cash Amount (is this cash on the target's BS?) $2MM
Minus: Debt $6MM
Minus: Transaction Expenses $1.5M
Closing Payment = $37.5M

Deal Expense Paid at Close $2.5MM
Deal Expense Paid at close $1.2MM
Debt Payoff $13.8

Total Uses = $55MM

What's confusing here, is that the target has cash on the BS. Why it isn't used as a source of funding?
The base purchase price almost looks as if it's EV, but it excludes "transaction expenses"? If I'm calculating EV do I add back transaction costs? my understanding is that I don't. This part confuses me, I can't figure out if the Base Price of $50MM is the EV or NOT?
Why is the rollover subtracted from base purchase price instead of being used as a source?
Would equity purchase price be Closing Payment of $37.5MM? OR $37.5MM + $7MM Mgtm Rollover and not include transaction costs?

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Jun 30, 2018
Scitor:

MPG thanks for volunteering as I have a few questions regarding an lbo model.

  1. In an LBO deal, do we have to use the target's cash on hand as a source? Say if target has $2MM cash on it's BS and Sponsor is contributing $20MM in Equity, do we include the cash on hand as extra source or the Sponsor's equity includes the $2MM?
  2. A hypothetical deal has the following structure:

Sources:

RLOC $2MM
Term $20MM
Mez $10MM
Sponsor Equity $23MM (has a $7MM mgmt. rollover, but it's not included as a source)
Total = $55MM

Uses:

Base Purchase Price $50MM
Less: Rollover Amount ($7MM)
Plus: Estimated Cash Amount (is this cash on the target's BS?) $2MM
Minus: Debt $6MM
Minus: Transaction Expenses $1.5M
Closing Payment = $37.5M

Deal Expense Paid at Close $2.5MM
Deal Expense Paid at close $1.2MM
Debt Payoff $13.8

Total Uses = $55MM

What's confusing here, is that the target has cash on the BS. Why it isn't used as a source of funding?
The base purchase price almost looks as if it's EV, but it excludes "transaction expenses"? If I'm calculating EV do I add back transaction costs? my understanding is that I don't. This part confuses me, I can't figure out if the Base Price of $50MM is the EV or NOT?
Why is the rollover subtracted from base purchase price instead of being used as a source?
Would equity purchase price be Closing Payment of $37.5MM? OR $37.5MM + $7MM Mgtm Rollover and not include transaction costs?

Please go throw MS at this guy

Oct 22, 2016

not sure why its not asked but; Why did you get into Private Equity and What do you enjoy doing there.

Mar 16, 2017

Is starting out as an associate in PE the only path to becoming a VP in PE or can you come from a VP role in IBD?

Mar 30, 2017

MPG - I hate following up with the same question I just posted a topic about, but considering how awesome you have been here, I figure it's worth a shot.

I went to a semi-target undergrad (top 20), and am about to finish up my 2 years at a lower MM bank in an industry I love, and which has provided me (all things considered) a well rounded experience and 3 (maybe 4) closed deals. At the end of the day, I may have made the wrong choice when picking my FT offers (leaned towards industry and culture rather than brand name/pedigree) - but I've made my bed, and have slept in it. My deals are not anything to write home about, but at the end of the day, they are completed deals where I have had significant involvement across the spectrum. Now, I've been incredibly selective and drawn out the process of finding the type of PE fund I want to head to, and as I near the end of my 2 year mark, I don't think anything is going to pop up that I can snag. Looking back, I should have been interviewing/networking EVERYWHERE, but instead I focused too long on my deal work internally and locating where I could see myself down the road rather than just another 2 year gig/accepting the first thing that popped up.

In your opinion, how dangerous would it be for me just leave after my bonus, maybe travel a month or so (considering I haven't taken a single vacation day off), move to the city I want to end up in, and just network and figure out my next gig day to day. I don't need (or even necessarily want) an incredibly pedigreed role, but rather a fund I can just get a great rounded experience and work with some talented and interesting people on a few fascinating transactions.

Thanks! Happy to divulge more personal info in messages if helpful!

Mar 30, 2017

I am no expert by any means but wouldn't that hurt your negotiating position significantly?

Mar 30, 2017
Mar 30, 2017
Mar 31, 2017
Aug 17, 2016

Array

Aug 11, 2017
Mar 13, 2018
Jul 5, 2018

Big bodacious goals will get us to another galaxy.

Oct 4, 2018
Oct 10, 2018