Investment Banking to Private Equity - 6 Things You Should Know

1. Why not just try to start with a PE firm?

There are PE firms that hire juniors out of undergrad. However, this 99.99% of the time is in a sub-associate role. In other words, you would be junior to me. I'm only pointing this out because I don't want you to think that a person out of undergrad is getting hired to function in the same capacity that I do. There is a tremendous amount of autonomy I have as a PE associate that I didn't have as a IB analyst. Most people (even the top performers) out of undergrad need constant guidance and instruction. Out of undergrad, no matter how genius you are, you have never done a real live transaction, negotiated an NDA, been the sole person responsible for a deal model, diligenced a management team who is much older than you, managed various third parties (lawyers, consultants, accountants, etc.)

You need deal experience to have any idea on how to go about approaching these things in an intelligent manner. This is what a PE associate does all from the buyers perspective. A person being hired right from undergrad to Blackstone isn't functioning in this capacity. They will be an analyst to the associate being groomed to function in this capacity. The reasons stated above is why most PE shops recruit to hire IB analysts after the 2-3 year IB period. When I started PE, I had 3 years of BB IB deal experience. I had a very clear understanding day 1 of my new job on how an M&A process and debt financing works. I also was well acquainted with modeling and how to be scrappy with digging up valuable information. I also had participated in diligence sessions before from the IB analyst side. With that being said, I can't stress how different the buy-side is and how much I've learned so far. My skillset was very transferable, but sitting in the buyers seat is completely different.

2. Why not try to become an associate at the IB you're at?

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 2-3 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 3 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.

3. Are PE firms that much more competitive to get into where you are basically forced to do IB first?

PE recruiting is 10x more competitive than IB recruiting. There are drastically fewer spots in PE than in IB. The cycles is which firms recruit isn't as structured. Although there is a PE wave of recruiting each year, there are tons of PE shops who don't recruit with the initial wave. PE networking is also harder than IB networking.

4. Do you move to PE because pay is ultimately better as you further your career?

Further in your career, especially at a successful performing fund (stress on 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.

5. Why do some go into IB with the intent of moving over to PE?

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.

6. Do you move to PE because work hours are better?

In most cases, all my friends have better hours. The exception is my 1-2 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 8pm deck that needs to get done for a client by tomorrow afternoon to discuss the mega deal that will never happen.

Mod Note (Andy): This week we're reposting the top content from 2016, this one ranks #47 with 25 silver bananas.

Comments (44)

Feb 20, 2016 - 10:42pm


undefined:"Negotiated an NDA"

Great post, but this is a questionable comment. Did you mean something else?

I think the comment could be interpreted to mean that real world experience is much more valuable than hypothetical or academic experience. In regards to negotiating an NDA, although it is much more simple/standard, it really does give an analyst, who has little experience, the opportunity to understand the process.

Negotiating whether the CIM can be shared with affiliates, if private equity funds can hire the management team for a separate deal (very rare and extremely hypothetical), the ability to trade in other securities (equity or debt), restricting the ability to contact potential financing sources, etc., are all somewhat important parts to the deal process that enables the analysts to increase their understanding and to see things from the perspective of different constituents. Working with Company's counsel to negotiate this aspect is extremely valuable, but is still viewed as administrative and is underrated.

Furthermore, a fair amount of MM PE funds require their associates to negotiate NDAs; it's a basic skill that is expected at a certain level... particularly if you work at operationally or distressed/turnaround focused shops.

Play the long game - give back, help out, mentor - just don't ever forget where you came from. #Bootstrapped
Feb 19, 2016 - 6:35pm

It seems you liked having the IB experience going into PE but also talked about the better work-life balance and pay in PE, along with a lot more competition when going into it from IB. So, which side would you argue for in taking a mega PE analyst or BB IB analyst role?

Feb 20, 2016 - 12:44pm


It seems you liked having the IB experience going into PE but also talked about the better work-life balance and pay in PE, along with a lot more competition when going into it from IB. So, which side would you argue for in taking a mega PE analyst or BB IB analyst role?

Also interested in your opinion on this.
Dec 26, 2016 - 5:45pm

Thanks for the post. Can you comment on recruiting as an analyst in LevFin vs. m&a?

As a levfin guy, I'm comfortable with the buyout financing process, the modeling, the business analysis and the credit/legal side. However, I don't have the pure m&a experience - how much of a disadvantage do you think this is?

Can the m&a/valuation side be learned on the fly or do you not tend to see too many levfin bankers in PE?

Dec 26, 2016 - 5:46pm

Investment Banking to Private Equity: How To Make The Move? (Originally Posted: 09/30/2013)

Today's investment banking career market is oriented towards the traditional path of breaking into private equity firms once their 2-year Analyst stint is over.

In detail, can those who have gone through the PE recruiting process from a 2-year Analyst position (traditionally at a BB or elite boutique) describe the process, how they prepared for it, and how to choose between the different types of PE firms?

Furthermore, can someone elaborate on why one might choose breaking into a MM PE firm over a megafund? What are the pros and cons of each?



Dec 26, 2016 - 5:48pm

IB to Private Equity/Distressed Debt (Originally Posted: 05/13/2008)

Hi All,

First I'd like to say a big HI to everyone - this is my first post, so please be gentle!

I'm hoping to seek some career advice from you all. Basically, I've got an offer to move to a distressed fund/private equity. I hope you can appreciate me not mentioning the fund by name but it's a fairly well-known PE shop which has in the past got involved in financial institutions and real estate. THe role will involve analyzing distressed structured finance securities (i.e. CDO, ABS, RMBS etc).

My background is 3 years in an i-bank (now 1st year assoc) on the structured finance/DCM desk London but have experience across most of the products mentioned above. Most of the analyst years were spent on modeling so I'm comfortable in this area. Naturally, I am looking to move because of the markets at the moment, and couple of months ago a number of my colleagues were made redundant. I was surprised not to have been axed myself, just simply because there has been less business coming in at the time.

To be honest, I never sought out private equity - so my idea of what goes on in PE is rather vague and on the lines of what a FIG DCM/M&A analyst does on the sell-side, ie. due dili, data room, presentations, etc. But I heard many people saying that distressed funds were the next best thing etc so I applied on the basis that I would be involved on analyzing structured finance paper. I know I would be totally out of my depth if I was to analyze a bank or a corporate, for example.

My questions are:
1) Given my lack of 'traditional' PE knowledge (most people i understand come from M&A and/or have MBAs), is this a decent opportunity?
2) Should I be naive to think that I could only analyze distressed structured finance securities whilst I'm here? (I'm keen to learn new things but I'm seriously allergic to balance sheets...)
3) Should I swap the relative security at the bank for the risks of entering a new place, where I have to learn new skills and gain recognition again amongst colleagues? (I say relative because we've already had 2 rounds now, and there might just be 1 more round of cuts before end of year depending on business levels, but we're now pretty lean in anycase)
4) Would Hedge Funds be a better place to go if one was to move into distressed funds? Which one would offer the better type of work? I see that the strategy at the PE fund would, for example, be to buy-and-hold heavily discounted paper and then repackage in a CLO when the markets recover, as an exit strategy, whereas in a HF, the strategy would be very much shorter term, e.g. relative basis trades.

Just to say, on the comp side - it's probably better in that there's a guarantee for this year and slight increase in base - but, to be honest, and i say it to all juniors (those at VP and below), moving for cash reasons at this level would a wrong reason. I'm clearly thinking about the long term prospects.

Many thanks for taking your timeout to read. I would be glad to contribute future advice in these forums.

Dec 26, 2016 - 5:50pm

Analyst to Private Equity (Originally Posted: 08/27/2006)

Anyone have any advice on moving to a PE shop after an analyst stint?

Working in Canada in investment banking as an analyst and considering the move to PE.

When to start looking for jobs?
How/Where to start the search?
Compensation in joining PE firms?
Do people join as an analyst or associate at the PE shop? (I'll have 2yrs of analyst experience under my belt)
Hours at PE shops?
What do most people do after 2 yrs at PE?

Thanks in advance.

Dec 26, 2016 - 5:59pm

Investment Banking Skills Transition to Private Equity (Originally Posted: 04/20/2016)

I am currently a consultant at a solid consulting firm and am currently in the private equity recruiting process. Wanted to reach out and ask all these experienced professionals out there - how much do the skills you work in an investment banking translate over to the buy-side? What I'm trying to gauge here is if Private Equity is a, "you learn everything on the job" type of situation like banking / consulting is.

Let me know your thoughts. Any of them are welcome as I enter this exciting phase in my life.
Thanks so much!

Dec 26, 2016 - 6:01pm

Private Equity out of IB (Originally Posted: 02/11/2014)

I spoke with a private equity firm today and they told me that they like to hire candidates out of a 2-year IB program because the candidates really learn how to slice up a company etc. What I don't really understand is what relevant skills gained in banking translate to PE, and how someone who does not do banking could get those skills. What am I missing?

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