Is the work in PE much more difficult than the work in IBD?
I've been reading about the differences between working in PE and in IBD, and from what I've found, it definitely seems that you do less 'grunt work' and the work seems more meaningful in PE.
From my understanding, the most intellectually difficult task in IBD is doing the modeling/valuation work. Meanwhile, in PE, you need to dig deep in the financial statement analysis and analyze debt structures. It seems that as long as you are moderately intelligent, the work in IBD shouldn't be too difficult. The work in PE on the other hand, definitely seems to be more challenging.
So I have 2 questions:
1) Is the work in PE much more difficult than the work in IBD?
2) Do you have to be very intelligent to be successful in PE, or is it a similar case as banking where you need moderate intelligence but after that your success is determined by various other factors?
More difficult, not necessarily. At the more entry levels it's not more difficult per se, it's just different. In PE you're keyed in on a specific deal(s). Instead of doing tons of models, you're concentrating on one in great detail. Instead of putting a lot of books or pitches together, you're on one (or two, whatever) for a very long time. You do get very into the details on due diligence, as in reading and knowing nearly everything (and by the time you've read your 100th employment agreement or 300 page MSA you'll probably want to blow your head off), not just having a high level understanding of it. But intellectually, it's probably more stimulating in PE, but you're still not flying around the globe thinking you're a baller.
I could write a book about the differences between the upper levels of IB and PE. I don't think that one is necessarily better or worse or that one adds value to humanity more than the other, but it does differ more as you progress. Just think sell side v. buy side. Broker v. investor.
I should caveat this with the fact that I never did IB and broke into PE into a less than traditional way. So maybe I'm doing physics in PE while people in IB are doing their multiplication tables, but I doubt it. I do interact with bankers (and lawyers) more than I interact with my wife and kids though.
Thank you for your comments Dingdong08, SB for you. Anyone else who has worked in both IB and PE have any input on the relative difficulty levels of the work?
I'd love to hear your thoughts on differences at the upper levels as well.
Many investment bankers are incentivised to work as hand holders, brokers and, at best, short term risk takers (via underwrites).
That creates a strong incentive, subsconscious if not frequently conscious, to focus on getting the deal done so they can collect their fee and move to the next deal.
When it comes to looking into the risk in a deal, those incentives mean they aren't incentivised to look too hard at the risk.
On the other hand, most PE guys are mainly incentivised by the carry they'll realise on selling a position and their reputations (so they can raise their next fund). That means they'll look into the risks much more diligently because realising their incentives depends on it. As @Dingdong08 mentions, that means diving much deeper into the diligence and understanding everything. That is hard work.
(as an exception to this, I'd point to my experience with PE funds doing China work (whether Western or Chinese PE house names); those guys were almost always more interested in just getting money out the door and earning management fees, and they were very willing to put their LPs' money to lowly diligenced, high risk stuff)
On the other hand, that doesn't answer the question which work is harder.
The comparison I've made above is to the level of diligence and scrutiny to a deal. However, your average bankers does a lot of hours and a lot of work in holding his/her clients' hands through transactions, broking access to information, contracts and money and underwriting work. A good banker will be out working his/her network for potential deals 24/7.
A banker, as an adviser, is also at the beck and call of his/her client, less in control of his/her own destiny. When you're the client (as PE guys are), your advisers work many more weekends and evenings and take conference calls during their kids' birthdays thn you do.
Good PE people are out networking and do a lot of work outside 9 - 6 hours too, but generally less than bankers.
If you mean difficulty in terms of intellect, both jobs require a lot of brainpower, but I'd say PE use business smarts and negotiation smarts more, while bankers are more networking smarts and salesman smarts. However, both businesses involves all these types of smarts.
tl;dr version - both are hard work, but in terms of hours and control of your destiny, PE seems to give you an easier life.
It completely depends on the PE firm. I was easily a top bucket analyst at my bank, but at my PE firm I was a median performer at best. And that's with a level of focus and intensity I've never had to apply in banking.
Is it more about stamina and quantity in IB...
Versus Quality and intricate detail in PE...
..?
in IB it is more about stamina, attitude (this is key), ability to multitask and attention to detail in PE it is about being commercial and having strong investment acumen, understanding what makes a business a good investment and figuring out what analysis is relevant when diligencing a transaction
in IB it is more about stamina, attitude (this is key), ability to multitask and attention to detail in PE it is about being commercial and having strong investment acumen, understanding what makes a business a good investment and figuring out what analysis is relevant when diligencing a transaction
i would say a lot more difficult and a lot more pressure. but less BS busy work.
PE working conditions vs IB (Originally Posted: 04/19/2007)
I know PE is really hot and everything but just wondering besides the prestige, money what are the working conditions / skills you pick up from working at PE as opposed to BB ib? thx
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