Life in a small PE group

bigimot's picture
Rank: Monkey | 57

I'd like to ask you what is the difference between the medium/big groups to the very small ones? Let's say around 10 people...

And yes, I've read the 'why people rather work for megafunds over mm' legendary thread, I'm not really looking for a breakdown of every sector just trying to understand if in a small group aiming for 1-2 deals @ year I will get to analyze many companies and gain experience in the field or it's going to be significantly lower (compared to guys working for medium/big groups) because of the deal flow/anything else?

I do find a good value working for such a group since I will probably be all over everything and be exposed to a lot of things normally I wouldn't be exposed to this early in my career.

PE is actually something I find very appealing and I'm not looking for exit opps here I'm looking for a place where I can actually get to use my head instead of running numbers the entire day. I'm not saying that I expect to make any investments from day one since I do have a lot to learn about investments first (can't wait for it tho..) but I'd assume it's not as bureaucratic as in the big names most of the guys here jerk to.

Thanks for your help :)

Comments (197)

Feb 25, 2011

I work at a small PE shop and like a lot of things about it.
1) the hours are reasonable
2) I have a wide range of responsibilities that I would never have at a larger fund
3) I have a say in important decisions
4) I make a real impact on the organization

Mar 2, 2011
International Pymp:

I work at a small PE shop and like a lot of things about it.
1) the hours are reasonable
2) I have a wide range of responsibilities that I would never have at a larger fund
3) I have a say in important decisions
4) I make a real impact on the organization

This but to a lesser extent since i am an analyst. I will add the cons though..

1.) No large analyst class so if your bosses are traveling (which is very often) than you are pretty much the only FO person left in the office. I'm lucky cause we still have a large MO and BO presence due to still having a lot of HF type assets so i have people to bullshit with during the day and they have nothing to do with what i'm working on so no shop talk.
2.) Exit opps are going to be tougher to come by since your network is a lot smaller, but if you do solid work for the higher ups than they will usually go to bat for you.
3.) I came straight out of UG and had no real first year analyst class structure..... but luckily my fund sent me to WSP, the PEI 3 day class, and will let me expense any modeling practice i want.

All in all it is like any other job, some days when you know you have something really big to work on you can't wait to get into the office and you will end up leaving around 9-10 but some days you really don't have shit to do but still have to sit by the phones in case someone traveling needs info or numbers crunched.

Feb 25, 2011

I echo the post above completely. BUT....DO NOT overlook how much more important culture and personal fit will be at a 10-15 person fund relative to larger funds.

You might end up spending 90% of your time working with 2-3 people and if you don't get along with one of them you're sh*t out of luck.

Feb 26, 2011

Thanks for the replays guys but I was looking to hear if there is any difference in the experience you get between working for the small shops who don't make lots of deals to the bigger ones who make more and larger deals. Is there or it's about the same?

Mar 1, 2011

worked some months in a very small conventional energy focused pe shop in latam.
I hated the ppl, liked the work, left after 6 months. Might be biased.

1) yes
2) yes
3) no (/depends)
4) yes

very secretive even within the team.
Less sophisticated deals. Gets boring after some months.

pros:
great learning environment

cons:
not many prospects

Mar 2, 2011

Thanks for your input. Did you move to a bigger PE?

Mar 2, 2011

Yes that's what I wanted to hear...regarding the job/deal low in smaller funds. Is it popular among the industry having days you get something really big to work on while having some days you don't have much to do, or is it mainly happens in smaller funds?

That's pretty much what I've tried to figure out...the difference between the deals and deal flow. Trying to figure out if I can really get all the practice and information I need if I work for a smaller fund.

Mar 2, 2011

I like this thread - I just verbally committed to a small Chicago-based PERE group with 7 guys.

Mar 3, 2011

Cool, glad to hear that, if you don't mind you are more than welcome to share your experience.

By the way I was wondering something. Lets say a private equity fund got 400M to invest in companies and after few months they spend the entire money investing in 8 companies. What exactly are they doing now? Just work around those companies and help them grow? They won't be looking to make any new investments for at least couple of years?

Mar 3, 2011

^^ That will never happen. You never blow threw your "dry powder" as a PE fund. You want to preserve as much cash as you can for follow on investments, acquistions of companies you believe can add value to a PC and other shit. And usually a PE fund of 400MM probably only got around 150MM on their first close and will start doing deals immediately, they then raise money and invest at the same time to get to their target size. The last thing you want to do is blow through all of your capital commitments from LP's and have nothing left to defend your positions with...

Mar 3, 2011

Oh right, so basically in the first round you look for the companies you would like to buy and spend lets say 150mm. Then with the rest (or part of the rest) they are to get to their target size by making different deals? Or for this they raise more money?

And at the bottom level does any of that affect you? Are you doing the same things all the time? Or there are 'stages' where you do certain work lets say until first close and then you move to do another type of work till you reach target size and then maybe something else etc ?

Mar 3, 2011

When you start a fund you have a target size (say 400MM) and in order to get going and get into deals (which you usually have in the pipeline already), you will have different closings. You may get all in the first one if you have a strong track record and have some solid LP's (or a solid cornerstone like CALPERS). But if not you will usually have a target for the first close, say 120MM, and start doing your deals. You don't want to take too much money before you have solid investments because the investors IRR is going to get slammed if you are just sitting on cash all day.

Mar 3, 2011

Alright, thanks a lot.

Would you mind saying in few words the main difference (if there are any as an analyst) between working for a private debt & equity fund investing in distress and mezzanine to a growth capital and buyout fund?

Mar 3, 2011

I'm at a fund like the first you described (as opposed to growth capital/buyout). I would venture to guess at the analyst level there isnt all that much of a difference except you are looking at different types of investments. As a credit investor you spend a lot more time looking at the downsides and seeing how much stress a company can take before your investment becomes worthless rather than how far the company can knock it out of the park.

Additionally, I can attest to much of what has been said above about the lifestyle. We are a very small group (<10) and the team is very senior. While that means I have a lot of responsibility, it also means that I am very close with everyone here. We get along well and if I get my work done, there is no face time if you have someplace to be. Not to say I just bounce at 5 if everyone else is still here, but I have no problem leaving if my work is done and I actually have somewhere I need to be. Thats the biggest benefit for me of working at a small shop. Flexible hours, good people, relaxed work environment.

Mar 3, 2011

Admittly, I just skimmed your post, however I noticed you said PE group, I assume you are talking about a shop and not a sponsors group, right? If so, I've written a lot about my experience working for a small PE shop populated with a lot of senior guys: track me for more detail, however, I can sum it up as such - way more qualitative work than I expected, a lot of research and thinking about industries, hardcore modeling was only done once we reached the LOI stage of a deal. Other than that I got a lot of exposure to the legal side, how a deal was structured in terms of incentives, countless NDA mark-ups (which was interesting at first, but they end up all being the same), summarizing lots of CIMs/books. The one thing, as someone mentioned, is you have no peers, so when something needs to be done, you are the lone guy there working, which did kinda suck - overall, I loved the environment, but ended up wanting to at least begin with a more traditional analyst experience at an investment bank.

fdba Emory Blaine and BBA or otherwise trying to find the perfect pseudonym.

Mar 3, 2011

I also work for a debt shop that does a bit of everything but with a focus on transactional debt (distressed, mezz, recaps) and I second what Billy Ray Valentine said. Group is pretty small, everyone else is fairly senior with one other junior-level person. Hours are pretty good, we're definitely focused on down-side and risk controls. Our hours definitely benefit from the fact that we're usually being pitched deals once an equity sponsor or restructuring advisor has done a lot of due diligence. We do a lot of the same types of modelling a PE firm would do, but typically there's already a deal and a capital structure in place and we're saying yea or nay.

Mar 3, 2011

Thank you for all your sharing guys, it's extremely helpful.

Faustus - after working both for a small PE shop and IB, would you mind to compare them? Besides hours/pay that are obviously important but not as important for me as the actual work (is it qualitative as well or much more pitching?)? Did you get to a point where you could generate ideas for investments? At your level is there much difference between the buy/sell sides?

Mar 5, 2011
bigimot:

Thank you for all your sharing guys, it's extremely helpful.

Faustus - after working both for a small PE shop and IB, would you mind to compare them? Besides hours/pay that are obviously important but not as important for me as the actual work (is it qualitative as well or much more pitching?)? Did you get to a point where you could generate ideas for investments? At your level is there much difference between the buy/sell sides?

I am scheduled to begin as an analyst in July, so I can't compare the two. I did generate ideas for investments and made a recommendation for every book that I read.

fdba Emory Blaine and BBA or otherwise trying to find the perfect pseudonym.

Mar 4, 2011

Alright I managed to come up with another question and would like to hear your different thoughts.
What I'm trying to understand is the learning curve and difference in experience you gain between MF/MM or even the very small shops.

I mean..in the larger places besides having more people around you and working on larger deals, do you actually get to work and learn from better investors? I mean I'd like to think that the brightest and sharpest minds would work for the huge funds but then again those people are likely to eventually leave and start their own funds or just excel at a smaller place.

Also I guess another thing about having more people in your firm is that you're being exposed to more ideas, more ways to invest etc etc so you can pick up from more than just a partner or two. I might be really off here so would really like to hear some thoughts... :)

Mar 29, 2011

Can anyone comment on typical comp range for small shops (5-10 people)? Ideally would like to hear thoughts on shops outside NYC...

Also, are there any thoughts on the notion or possibility of there being a sort of ceiling as to where you can go within the group, as well as exit ops, when the group consists of only a couple partners, a VP or two, and a couple of associates? In this specific case, looking at a generalist fund with 2 Partners, 1 VP and 1 Associate (coming up on 4 years with the group), and the position would be as the second Associate.

Thanks guys.

Mar 29, 2011

I have a question as well. I'm in the midst of cold calling and finding a boutique PE company to summer intern at before I go to a M7 school this fall (already accepted). What kind of things are interns expected to do, and how can I prepare?

Mar 29, 2011

I just finished my first week as an associate with an eight person PERE group in Chicago focused on distressed real estate, specifically hotels. Five partners, two others who oversee ongoing activity at our owned assets (Asset Management), and me. I am the youngest by at least 15 years.

I just started so I dont have a ton to share yet, but the level of responsibility is really racheted up. Hours are pretty good so far. Very relaxed environment, jeans to work, nobody cares about too much as long as you get your work done.

Mar 27, 2013
Hotel Guy:

I just finished my first week as an associate with an eight person PERE group in Chicago focused on distressed real estate, specifically hotels. Five partners, two others who oversee ongoing activity at our owned assets (asset management), and me. I am the youngest by at least 15 years.

I just started so I dont have a ton to share yet, but the level of responsibility is really racheted up. Hours are pretty good so far. Very relaxed environment, jeans to work, nobody cares about too much as long as you get your work done.

Did you work for two years in IBD before your PE stint? I am also interested in doing PE in Chicago. What is the pay like? I'm hearing 150~200 all in for smaller shops (500mm>) and 200~250 for (1B+) Is that pretty accurate?

Nov 26, 2013

Good thread, accurate.

Additionally, I can attest to much of what has been said above about the lifestyle. We are a very small group (

-Well said.

Best Response
Nov 26, 2013

Pros: Flat organization, exposure to all elements of a deal (from sourcing, AM & re positioning, to disposing), extremely entrepreneurial, you may be working / having meetings with Partners & Executives of firms that you would never be able to vs. a large company. Depending on the shop, you may very well be creating / implementing processes & bench-marking initiatives such as portfolio valuation models (from a blank excel), which you would never be able to do at a large shop, where you just update whatever was done the last quarter. Seeing something that took you 2 months to create being utilized on a weekly basis is pretty self rewarding.

Cons: accounting / data systems / FPA systems may not be in place, which can make your job extremely difficult for something that could have been done at your larger shop with a click of a button. I'm talking about gathering actuals for projects or comparing reforecasts to budgets.... this could take literally weeks. With the organization being so flat, you very will can be doing jobs below your paygrade. I'm talking about cleaning kitchens, answering the doors for whoever may come to your office, etc. Not saying anyone is above doing these things, but it does suck when you are knee deep in UW and the damn door rings every 5 minutes.

Just a few thoughts that came in my head this morning. I moved from a large company to a small, and to be completely honest, some days I like the boutique atmosphere, and other days I miss being at a large company.

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Nov 26, 2013

@GentlemanAndScholar" Yeah, I supposed all the things you mention definitely make sense. I feel like I have been missing part of the bigger picture by working at a large firm where I am laser focused on one part of the transaction. The idea of better understanding the entire process of a deal and its life cycle sounds like it would be beneficial for me as I am still early on in my career. What exactly led you to make the switch from a big firm to a small one?

Nov 26, 2013

Not a direct comparison, but I worked for a major commercial leasing/investment sales platform and now work for a small REPE shop. Went from suit and tie every day to button down and jeans/khakis. Went from my bosses being complete tools to ridiculously helpful, friendly, and actually caring about my knowledge progression. Went from being told "don't worry about that at your level" to things being stopped mid-convo so the president of the firm can explain things to me with a smile on his face so that I better learn his thought process.

Granted, so much of this for me is personality-based, but so are many workplace issues. My bigger office was full of douchebags who got off on their titles and the "chain of command." The smaller office is flat and is just the best experience.

Nov 26, 2013

Also, if you don't plan on staying there long-term and are just looking to pick up some junior level experience, then pay close attention to the background of the investment professionals you mentioned. If they are MIT grads, then ok, great. From an exit opps/experience perspective, you want your time spent there to be as advanced/thorough as possible.

Nov 26, 2013

Pros: involved in all aspects of the investment process, get to see how AM/dispositions/financing gets done, it's possible you may get more rigorous modeling (creating a lot of models from scratch rather than recycling the same ones over and over), interaction with senior management, being able to run with a deal independently if your boss trusts you

Cons: Organization is small so admin stuff falls onto the most junior guy, comp less than competitive (dependent on shop), it's possible they may not have the manpower to work on multiple transactions, sometimes work on stuff not related to investing, but requires someone with more excel knowledge since others do not know how to

Nov 26, 2013

OP I work at a very small shop and to harp on others opinions...

Pros: There is no part of the deal I don't work on. I am the only Analyst (although we are growing) and am solely responsible for underwriting all deals, solely responsible for anything pertaining to Argus, and am now running the point when dealing with all due diligence matters for transactions under contract. Tons of screwing up, tons of learning. Lots of responsibility. But I have met and personally know all of the investors in our fund, talk to MD's/Broker's/Player's on a daily basis, overhear every conversation between principals including: Meetings with potential investors, talking with JV partners, setting up fund financials, working on next fund materials. My hours are very good (Non-NY). Climbing the ladder is much easier especially as a first mover into a small fund. If the fund grows, I grow. I believe you can go from analyst to associate in 2 years and VP in another 2 (not sure if large shops the growth happens that quickly).

Cons: Responsibility can be a bit overwhelming at times. Things need to get done qucikly and get done right. Pay I believe is substantially less than large shops at the junior level especially with the amount/depth of work you are doing at the junior level. Lack of a big name on the resume is concerning when looking for exit ops. We can come in 2nd place on deals all the time (no silver medals in this business) not sure if this pertains to the fact that we are small, But i do believe that brokerage shops often give the last looks to clients who they deem more established and large institutional owners feel more comfortable with established funds in buyer interviews.

As someone who's dream is to open their own repe shop 15-20 years down the line or at the very least be a MD in acquisitions, I can't think of too many other better places to start my career.

Feel free to PM.

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Nov 26, 2013

I feel like you wrote down everything I was thinking my mind as if you were me..the screwing up part/learning thing and the 2nd place in a ton of deals really hits the nail on the head

Nov 26, 2013

@REPE8 What was your path to the firm you work at now? Did you transition from a larger shop?

Nov 26, 2013

Directly out of school.

Nov 26, 2013

what is "small" in REPE?

Is raising a $1B fund a good milestone to not be considered "small" anymore? i.e., does a $1B raise start putting you on most folks' radar?

(NOTE: i'm talking about a $1B fund, not $1B AUM. assuming AUM would be more since you will likely have AUM from a prior fund.)

Nov 26, 2013
new job time:

what is "small" in REPE?

Is raising a $1B fund a good milestone to not be considered "small" anymore? i.e., does a $1B raise start putting you on most folks' radar?

(NOTE: i'm talking about a $1B fund, not $1B AUM. assuming AUM would be more since you will likely have AUM from a prior fund.)

A billion dollar raise is definitely not small in any world.

Nov 26, 2013

A billion raise isn't small. If you get a billion in commitments from investors, you are most definitely on the radar.

Small to me is a fund with a cash raise of less than 100 million (so total assets of about 250 million with leverage).

Nov 26, 2013

Interesting read, but doesn't really answer my question.
What I get from the other thread is that it is better to do BB IBD than small PE shop, but in the specific case of small PE shop, what are the exit opportunities?
Thanks

Nov 26, 2013

It seems like you'll be dealing with small-cap/micro-cap companies, and that market can be limiting from a financial analysis/modeling perspective.

However, there are some cool things about this investing universe; you may actually find that you enjoy small cap work. Price discovery is so random at this level that deep value plays can be easier to find, and carve-outs/business segment divestitures/special situations often fall in small cap territory.

If you don't have much else lined up, I'd take the gig and learn all you can about small cap PE--I'm sure the good firms can make good money here.

Nov 26, 2013

Thanks for your answers.

I am sure I will find the job super interesting. Probably no cold calling, mostly business analysis and go/no go recommendations.
Only potential downside I see is being stuck in that firm, that's why I put so much emphasis on lateral moves.

With a Top 3 MBA, 5+ years experience in industry and a small PE shop gig, my assumption is that it would be relatively easy to join another small shop or slightly larger one, or go to corp fin.
From what you say, it doesn't seem to be that easy. So where do small PE shops analysts go?

Nov 26, 2013

Not sure about the order you had in mind for MBA, Industry and small PE shop. I'd see MBA as a means for a "career reset" or a targeted move to a larger PE firm but if PE shop is the last stage then that could be a little more complicated.
From what I've seen and mostly heard, these 4 "exit" routes seem to be most common besides just staying in the long-haul at the PE shop: (1) start-up, (2) move to portfolio firm, (3) lateral within small-cap, (4) starting own fund at a certain level of seniority. Some people also move into advisor roles at regional boutiques while I haven't heard often about people going into Corp.Dev. at really large firms.
Take it with a grain of salt though, I'm not really an industry veteran here.

Nov 26, 2013

I don't see why you couldn't move to a larger fund if you worked at the small fund for a year or two then went to HSW.

Nov 26, 2013

A few quick questions that could be helpful in giving direction.
Do you have an MBA at the moment? What is your industry experience?
What is the focus of the shop? What are the differentiating factors?

I worked in a small shop out of UG, and the senior guys there were all ex-operating partners/C level execs at larger companies. Their angle was that we are a capital partner that understand how to run businesses, and can help your Company grow.

If the shop has an angle like this, you could move up through the ranks, take a high level position at a portfolio company, before returning with the operating experience aspect of your resume fulfilled.

Nov 26, 2013

Yes, I am about to finish my MBA, and have experience with large firms in the consumer industry, operations and sales roles.

The shop is really small, but operated by an industry veteran with an impressive track record and a large international network. Funds are specialized in Growth capital, across industries.

Since it is such a small shop, I have the opportunity to get carry in a few months and possibly become a partner. So it looks definitely exciting.

Now I dont want to get stuck, and out of the 4 options you mentioned EuroLocust, only (3) lateral within small-cap looks enticing to me (one of the reasons is that I would probably look for financial stability if I have to leave that PE shop, so it rules out the entrepreneurial ventures).

Would Corp fin, ER, or Corp dev (at mid-size firms) be viable exit options?

Thanks all for your answers, I really appreciate

Nov 26, 2013

Sorry this may be confusing, but if you know anything about Pros/Cons/Exit Opps of a small PE firm as described above I'd love to hear your input

Nov 26, 2013

Trick question?

Nov 26, 2013

It's tough to move up market. If your fund was executing similar sized deals (with significant fund concentration) as larger sized funds, then it is feasible. A pro is that at a small shop, the other deal professionals should be ok with you sourcing deals, which is viewed as a positive. If you are able to build a strong network of lenders, intermediaries, as well as generate proprietary deal flow, you could have the opportunity to leverage that into a larger fund.

All of that being said, the exit opps of smaller funds it typically to other smaller funds. Cons are that resources are limited. My past experience was in a similar sized fund, that had no resources at all (CapIQ, ThomsonOne, AlphaSights, GLG) and that a bulk of the due diligence process is dependent upon the junior staff (including quality of earnings). This is obviously my personal experience, so that may not apply.

The main issue with recruiting is that larger funds tend to take associates from brand name backgrounds since they know what they are getting in terms of quality/training and can easily vet through their network of contacts. This makes lateraling difficult, but if you are successful in building up your network, it is still feasible.

Best of luck!

Nov 26, 2013

You had to do your own quality of earnings as a PE associate?

Nov 26, 2013

I'm glad someone asked, didn't want to get into specifics and detract from the intended message of the post. The firm I worked with would hire an individual accountant to perform a QOE and analysts/associates would pitch in. The deals did not have bank financing, and the investments were typically growth investments.

Nov 26, 2013

Additional question for everyone - if this described PE fund specialized in acquiring targets from industries that are uncommon in PE (i.e. not industrial or biz services), would this be another big negative in terms of lateraling prospects?

Nov 26, 2013

Pros: You get to get involved a lot more. The deals are much more personality based than transactional. You are much more likely to see proprietary deal sourcing which can lead to more interesting deals. Your firm is extremely close knit. You could have more flexibility than a larger fund.

Cons: The deals are more personality based. You're more likely to see proprietary deals which are more volatile. You don't have access to the same resources. You don't have a name brand. It feels worse to have an upper limit on transaction size than a lower limit. Add on acquisitions feel miniscule (and usually are). You don't get the same type of experience as a large fund (i.e. analysts at large funds are hammering out models for way more prospective deals than you would, which is a con in the sense that you won't gain the same level of experience that they would).

Nov 26, 2013

Do you get carry?

Nov 26, 2013

Not in this scenario, no - carry (in this scenario) would be reserved for the Partners so that would be in a few years time at the earliest

Nov 26, 2013

Idk how about the Goldman Sachs?

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Nov 26, 2013

Condescending people must get you far in life

Nov 26, 2013

The experience you get at a small PE shop is highly underrated. You get much more actual experience and you learn to voice your opinion on companies and learn to develop investment theses. The transition upmarket will be very hard but if you can network, it will be easier than you think. On a side note, you can try to work your way up in the firm and get to a VP-MD level with carry, where you can still do very well, without going to a large or "prestigious" firm.

Nov 26, 2013

Moving around in PE shops is hard in general -- it's a buyer's mkt. From large PE shop to small to hard, from small to large is even harder

Separately, 1 other con of small PE that I don't think has been fully addressed here -- you will work with smaller companies, which in my experience requires much more work. This may sound counterintuitive -- e.g., larger PE firms invest in larger companies, that have a greater number of dimensions, business lines, competitors, etc., thus, one may be tempted to think that these larger companies will require more work. In my experience, the opposite is the case -- i.e., smaller PE firms are often investing in nascent businesses, which often (but not always) have lower caliber mgt teams, fewer reporting mechanisms, smaller bus dev teams (i.e., you can effectively become an internal M&A team..), etc. This is not necessarily a bad thing if you like true 'business building,' but it is really hard work!!

Nov 26, 2013

Just to be clear, Cogent is not a secondary buyer, they're an intermediary. I also didnt think a buyer of that size would have an analyst program?

Nov 26, 2013

Can anyone comment on exit opps from a secondaries fund after a 2-3 yr analyst stint?

Nov 26, 2013

I responded to your other message, but PM if you want.

Nov 26, 2013

Also interested

Nov 26, 2013

130k + 50 to 80 bonus

Nov 26, 2013

I would say $175-$200k.

Nov 26, 2013

$700MM AUM PE - $160-$175k all in

Nov 26, 2013

It would be helpful if you guys could mention the cities you're working in.

Nov 26, 2013

$500mm West Coast, $100k salary ~$130k bonus for a 1st year associate

Nov 26, 2013

$1.2B MM San Fran firm.

$120k base
$120k bonus

Nov 26, 2013

big REPE shop? i mean com'on dude, your exit ops are what you make them, say it with me: 'think for yourself'.

ps. it's exit opportunities not options [the dude edited post correction - lame]

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Nov 26, 2013

cold calling and sending info and trying to book meeting.

I would say do it until you find another job and get comfortable talking on the phone.

It's the worst work you can get as per the tasks but might be beneficial to know how to sell (depending where you want to work) but selling is a big part of this business!

Nov 26, 2013

Actually I freelance in this area part-time. I have a capital introduction service and I'm always going through due diligence on new managers and sitting down with them to hear their pitches. I'm guessing you're an undergrad student looking into it as an internship in relationship management. If its a very small fund it could be anything from helping to develop literature for pitchbooks to actually trying to network/cold-call into meetings with HNW individuals and instiutions. So we're talking about having a lot of confidence and people skills for a young guy. What's the name of the fund and how big are they currently? PM Me if you want and I can answer any more questions.

Nov 26, 2013
Seigniorage:

Actually I freelance in this area part-time. I have a capital introduction service and I'm always going through due diligence on new managers and sitting down with them to hear their pitches. I'm guessing you're an undergrad student looking into it as an internship in relationship management. If its a very small fund it could be anything from helping to develop literature for pitchbooks to actually trying to network/cold-call into meetings with HNW individuals and instiutions. So we're talking about having a lot of confidence and people skills for a young guy. What's the name of the fund and how big are they currently? PM Me if you want and I can answer any more questions.

+1

Regards

Nov 26, 2013
Seigniorage:

Actually I freelance in this area part-time. I have a capital introduction service and I'm always going through due diligence on new managers and sitting down with them to hear their pitches. I'm guessing you're an undergrad student looking into it as an internship in relationship management. If its a very small fund it could be anything from helping to develop literature for pitchbooks to actually trying to network/cold-call into meetings with HNW individuals and instiutions. So we're talking about having a lot of confidence and people skills for a young guy. What's the name of the fund and how big are they currently? PM Me if you want and I can answer any more questions.

Message sent.

Thanks!

Nov 26, 2013

Are u allowed to freelance while working FT (especially in a bank)?

Nov 26, 2013

How the hell would you have time Zico?

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Nov 26, 2013

Well I was asking the question from a legal standpoint...

other than that, It would be feasible given one has a huge professional network in the city they live in :)

Nov 26, 2013

Probably creating a lot of marketing documents and pitches. Additionally, many small shops have difficulty raising many because of the due diligence process. My guess is that you will spend a lot of time chasing down answers to questions that investors have.

Nov 26, 2013
coldemailmaster:

What's up everybody,

I'm a sophomore at a non-target currently interning at a wealth management firm in manhattan. I have the opportunity to possibly get an internship with a small 2-3 person PE firm. Obviously the name of the firm is not recognizable. I would assisting with the models.

How would this be viewed on a resume if I want to get into banking? Would it still be worth it even if firm is a not a recognizable one b/c I get to put some modeling on my resume? Or should I shoot more towards a more reputable wealth management firm?

Thanks, any advice would be great.

I would suggest the PE firm, especially if you think you will be getting real work. It's infinitely more applicable to banking, if that is the ultimate goal.

Nov 26, 2013

Bump. I'm in a similar position. Any recommendations (though my background is in research for a financial services firm)?

Nov 26, 2013

I have had this same dilemma many times. My first suggestion would be to contact a person in HR that maybe you have spoken with, and say that you didn't want to bother the VP but just wanted to be sure they hadn't been trying to get in touch with you. If no HR, maybe just send a VERY brief e-mail. What are others' thoughts?

NEVER lose your BlackBerry
www.conveniencesoftware.com

Nov 26, 2013

Thanks for advice. There is no HR (at least I got in touch directly with VP). This waiting is killing me...

Nov 26, 2013

Don't call him. Follow-up with an email. You don't want to put the guy on the spot.

Nov 26, 2013

I know it can be killing. I suggest you write him an email. You can write him another one in a couple of days if no response. Eventually you can call him, but send at least 2 emails before doing so. This worked for me.

Nov 26, 2013

Many thanks for all pieces of advice. I emailed him as you guys advised and he wrote back immediately to give him few more days. Thanks a lot again!

Nov 26, 2013

IMO $100MM would be worthwhile... very small but still enough money to get deals done and the potential to grow. However, 5-10MM is REAAAAALLLYYY small and would be tough to get deals done.

Nov 26, 2013
Billy Ray Valentine:

IMO $100MM would be worthwhile... very small but still enough money to get deals done and the potential to grow. However, 5-10MM is REAAAAALLLYYY small and would be tough to get deals done.

That's my concern too. But still, is a Marketing internship in a f500 really better? At least in the micro-fund you're still in the financial sector.

Nov 26, 2013

On this note, what is the smallest size that is still respectable to the BBs? $500M? $200M?

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.

Nov 26, 2013
bulge4lyf:

On this note, what is the smallest size that is still respectable to the BBs? $500M? $200M?

Anything over $100M is decent.

Nov 26, 2013

it can't hurt. i would say definitely get the PE experience on your resume if that is where you want to end up.

As far as what you can do while you are there. I would ask for the roll of a typical associate. You shoudl be reading through offering memorandums and writing up short memos on the business. what are the key diligence items, etc? ask to sit in on meeting with management, and if you're comfortable, try modeling out a few of the businesses and running a few LBOs. should be a good experience...

Nov 26, 2013

Hi, PM me stanford '07.. I'm currently an analyst at a PE firm and a 2005 alum. I can tell you the pros/cons if you're interested.

Nov 26, 2013

Hi PEanalyst, would you mind if I PM-ed you?

Nov 26, 2013

no problem.

Nov 26, 2013

no problem.

Nov 26, 2013

Sounds like growth equity- little less modeling, little more market analysis.

Nov 26, 2013

People are accepting internships in whatever they can get in this market. this PE group (regardless of the deal size) will be great experience. And yes, I would put "Summer Analyst" on your resume.

Nov 26, 2013

thanks for the info/advice guys.

Comments from people who have gone this route, went through the recruiting process at ibanks or are current analysts are greatly appreciated.

Nov 26, 2013

Beggars can't be choosers. Take the offer.

Nov 26, 2013

Any idea how this PE fund operates? If its a smaller shop focused on sourcing its own deals (read: dialing for dollars), then I would argue its not worth your time. However, if the fund does a lot of MM auction deals, then it could be a very good experience - also, I can tell you from experience that large-cap funds certainly prefer MM PE experience over none-at-all for MBA grads.

You mention $2 bn in buying power - what is the actual equity size of the fund (I am guessing $500 mm to $1 bn)?

Nov 26, 2013

Hi Smuguy97, thanks for your feedback. After some research, the firm invests its principal's capital, so it's not operating through a fund (is that what you meant by dialing for dollars?). I'm finding that the firm makes investments up to $2 bn (no info on size of capital had or leveraged). Looking at their investments I see some legitimate "house-hold name" buy-outs; they've been covered in the WSJ.

In short, looks like a very small firm of wealthy partners using their own money. If I were to intern there, how would this be received by pure PE firms who might hire me in the future?

What are your thoughts?

Nov 26, 2013

Have you considered the fact that b-schools are looking for candidates with meaningful work experience and a cohesive story as to why an MBA and why now? I am not sure if by "intern" you really mean a 2 year analyst stint a small PE shop. If my assumption is correct then I would say that the experience will be extremely relevant and helpful in your MBA applications and post-MBA career goals.

Nov 26, 2013

thanks junkbondswap, my story is one of a career switch. i realized after 100th book on henry kravis, bruce Wasserstein and ted forstmann I should probably get into high finance while i'm still young.

by intern i mean do whatever it takes to immerse myself in the industry, if that means having to shred or do menial office tasks, if I get some exposure and stay on my free time to learn modeling, investment strategy and can walk away with a palpable experience, it's well worth it. at this point it's more about sheer passion and curiousity than wanting a "well-paying job" in PE

i can continue to do what I'm doing now (not finance) and negotiate the switch after b-school, or I can try to break in now and at least have PE on the resume at graduation.

what do you think?

Nov 26, 2013

Sheer passion for high finance? No banker/PE guy I've met actually has a passion for finance (what can be more boring?) It's a passion for money. the fact that you are willing to work for free now doesn't detract from that: it is the expectation that the $$$ will roll in later. Let's not confuse the two.

Nov 26, 2013

Not personal experience, but a friend of mine interviewed at a place with a similar number of employees.

His feedback was that it was as technical as larger places which he interviewed at, but also a greater degree of fit based questions too. He ended up taking that offer ahead of some other places and he enjoys it from what I hear from him.

Certainly worth going in and expecting a thorough questioning on both if his experience is anything to go by.

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Nov 26, 2013

Logic says you will be questioned on both seriously...if it's less than 10 people and you're one of only a few associates, they're going to want to know that you have your technical knowledge down without any issues. They're also going to want to make sure that you fit in well with them, so you can probably expect lots of both types of questions.

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Nov 26, 2013

Expect everything. Modeling test (or some variation), deal reviews, fit / personality questions, firm specific questions ... everything. The general thought process of firms with fewer than 10 people is that they have so few people that they can't afford to make a single bad hire.

Nov 26, 2013

I work at a small firm. My interview was entirely fit, but I think I'm the exception (my "interview" was just a relaxed discussion over dinner) and one of the partners knew of my technical abilities beforehand somewhat anyways. I would prepare the same way you would for any other interview to have all your bases covered.

Nov 26, 2013

I've been at smaller firms most of my career (>10 ee's though) and we've always grilled on both. Usually a sr associate/VP goes for the technical part, then we'll bring them back a few times for fit, make sure they get along with jr people and sr people, usually do a dinner with some senior people and drinks with more jr people (and/or mix it up, it's not set in stone we just want to make sure they get along with everyone but not stick them in the middle of 20 people who have worked together for years). Like others have said, when you're smaller every hire counts a lot more and because you can't get away from them you want to make sure you like them. Wait until you get to more senior levels if you change firms. Might as well give you an anal probe.

Nov 26, 2013

Agree with everything people above have said. I work for a small PE shop as well and my interviews were a mix of technical and fit, although majority of the interviews were skewed towards fit-based questions. Had a modeling test as well as a case study,

However, one thing that I noticed in my own interviews and based on others I've spoken with, is that the fund will want to know that you're going to stick around for a while. It obviously makes sense, since being a small firm they wouldn't want to hire new people every six months. So you should consider somehow indirectly slipping in that you're gonna stay with them for a while. It's meant to reinforce something that usually goes without saying, so indicating it during discussions can go a long way.

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Nov 26, 2013

Interesting question. Assuming PE is something you want to do long-term, going to a smaller shop might not be such as bad idea. If it means not having to get an MBA to climb up the ladder, you might be able to rise quickly and end up with more responsibility than at a larger fund. Even today's megafund PE started out small so if one day you wanted to start your own shop, you'd have considerable experience at MM/small-cap level and could grow from there. That's just my take though, if you found a larger fund that wouldn't send you to B-school, that would be equally appealing.

Nov 26, 2013

Going from a small PE fund to a mid market PE fund will not be a significant challenge. I highly suggest you take the small PE firm and then attempt to lateral after you've put in your typical two years. Or, go get your MBA and just try to go through normal recruiting.

Nov 26, 2013
CompBanker:

Going from a small PE fund to a mid market PE fund will not be a significant challenge. I highly suggest you take the small PE firm and then attempt to lateral after you've put in your typical two years. Or, go get your MBA and just try to go through normal recruiting.

Completely agree...

Nov 26, 2013

Thanks. On another note, what are your views on getting into a business development company investing in 1st/2nd lien debt (AUM close to $1Bn). Not PE but seems like an interesting opportunity to even get into AM later on.

Nov 26, 2013

2/20 is standard for most PE looking funds, especially debt funds... you've basically nailed what I do, except min is more expansive and can cover the full spectrum of the capital structure...

really is a great experience in my opinion as you get to know not only diligence but the buyside nuances of debt facilities, a great tool for any financial engineer in a buyout world

Nov 26, 2013

Interesting. What are the benefits of joining such a firm rather than PE? Also, are you aware of income potential at debt funds vs. PE? My main concern is waiting out to join PE in the next few months or whether I'll be able to get good experience transferrable to PE if I so choose that path 2/3 yrs from now.

Nov 26, 2013

sounds like a great opportunity to mean, at a high level at least without knowing specific details about the job or the firm.

need more info for a better answer.

Nov 26, 2013

you will learn a lot and do more deals than at a megafund i would say. also the operational involvement will more likely be higher (also given the fact that it is growth equity). Dont know if you can move to a megafund later on but I guess it wont be necessary if you like it at the smaller fund.

Nov 26, 2013

Movement to a megafund would be limited I imagine, but if you're happy there, especially if it's your best opportunity coming out of a non-target, it wouldn't be a bad move at all.

Nov 26, 2013

AUM?

Nov 26, 2013

AUM? Number of people working there? How many analysts? Is this their first fund? How new is the fund? How much 'dry powder' do they have left? How many portfolio companies do they have? What are your long term goals?

Regards

Nov 26, 2013

$70mn AUM, starting to invest out of the new second $40mn fund. Typically invests $3-5mn. 9 companies in the portfolio appear on their website. 2 Managing Partners, 3 Principals, 4 Operating Partners. Nothing has hinted at cold calling yet.

My long term goals? Upper middle class or above, work doing something interesting, travel abroad. PE would certainly count as "something interesting." This particular shop would have no travel abroad opportunities compared to other jobs I'm looking at, but I could easily live without.

Short-term goals? Learn as much as I possibly can, preferably with skills that are transferable.

I don't need a megafund. What other exit opps are there? My impression is that it's pretty rare to go from buyside to IB, no? Would I pretty much be in PE for the rest of my days?

Nov 26, 2013

More PE or the industry of one of your portfolio companies for exits.

Nov 26, 2013

You could potentially exit to IB but the transition isn't easy. They will want to know why you want to leave a job with less hours for more hours with similar pay, etc. You could always go to bschool and potentially get into IB after that.

Your best bet is to give us an idea of what other opportunities you have. This seems like it would be a good opportunity, but not necessarily the best if depending on what else you have to choose from.

It seems like you would get a good amount of experience since there isn't likely to be a lot of junior people to share the work with. An obvious draw back will be working by yourself a lot and you will have to be extremely proactive at networking since you won't have a big analyst class, thus an instant network.

There may be some other things to consider but that will depend on what other offers you have to choose from or are looking at.

Regards

Nov 26, 2013

Will a PE shop this small really have less hours and similar pay (I really have no idea)?

I'd be jumping the gun because I don't have any offers yet, but the other offers I'm trying to obtain are MM IBD, sovereign debt team at a large mutual fund company, and valuation at Big 4. Those first two would involve travel abroad.

I'm trying to get a feel for this job in case they spring the "if offered this job, would you take it?" question. Though with it being this late in the game, I'll pretty much take anything even remotely good :/

Nov 26, 2013
NOMNOMNOMNOM:

Will a PE shop this small really have less hours and similar pay (I really have no idea)?

I'd be jumping the gun because I don't have any offers yet, but the other offers I'm trying to obtain are MM IBD, sovereign debt team at a large mutual fund company, and valuation at Big 4. Those first two would involve travel abroad.

I'm trying to get a feel for this job in case they spring the "if offered this job, would you take it?" question. Though with it being this late in the game, I'll pretty much take anything even remotely good :/

It's possible the hours and the pay might be slightly less than street but it's hard to say. It depends mostly on the culture the age of the senior level people, whether they have family, etc. Is this in NYC?

It seems like a decent enough job to accept, especially if you don't have any other offers...but, I do think it's worth the effort to continue networking/interviewing. Even a sure thing isn't always definite, so keep working your network.

Regards

Nov 26, 2013

It's not NYC, more like South Eastern PA. Both Managing Partners are Princeton alum, and the one I talked to is ex-Goldman LevFin. Both have families and are in their mid 30's I'd say.

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Nov 26, 2013

Philly area? That's where I'm from.

Nov 26, 2013

Yes.

Nov 26, 2013

What are the comp levels like for the senior guys (Post-MBA-Ass/VP/MD) at small PE firms the the one NOMNOM is describing?

Nov 26, 2013

You would think that with only $70MM in assets and 2 Managing Partners, 3 Principals, and 4 Operating Partners the cash comp has to be on the low side.

Nov 26, 2013

You'll get deal experience as well as learn how to run businesses in a shop that small. Typically the junior people in small PE funds get a wide range of exposure to the process in addition to doing the grunt work. Having said that, $3-5mm doesn't do anything so sounds like they may partner with other funds and may just invest in minority stakes. If that's the case, not sure it would be as good an opportunity as a slightly larger fund that makes control investments in smaller companies.

Nov 26, 2013

That info is all just from the job posting and the website, so not 100% reliable. Does controlling stake vs. small stake really matter that much at the analyst level? Also what might be typical comp and how much does it vary with the performance of the firm? I wouldn't be struggling to make rent some years, would I?

Nov 26, 2013

Not sure bout comp with a fund that small and that headcount but in my opinion yes minority stake vs. controlling does matter. If they're just partnering with control funds then they won't be as active in running the business. From an analyst perspective does it matter? Yes and no - you're still a grunt and you're doing a lot of the same grunt work regardless in terms of deal analysis, modeling, writing etc. but if it were me I'd want to be in a control shop just for the sake of having exposure to more senior people who are active in running the portfolio cos the fund acquires. Really depends on the style of the shop, how hands on they are w/ their portfolio companies etc.

Nov 26, 2013

Disagree about networking ops, you will have way better quality networking but not as many, if that makes any sense. You will get exposure to CEO's and other professionals in the space and not just analysts...I work in a MM and it sucks not having another analyst my age.But other than that i love it.

Nov 26, 2013

Disagree about networking ops, you will have way better quality networking but not as many, if that makes any sense. You will get exposure to CEO's and other professionals in the space and not just analysts...I work in a MM and it sucks not having another analyst my age.But other than that i love it.

Nov 26, 2013

more case study type questions. be able to relate your work/companies u consulted for to PE and the value add there..

just like in any interview.

Nov 26, 2013

Daniel Ocean, have you ever been to a PE interview before? Judging by your response, I would have to assume the answer is "no." Maybe they'll go lighter on the interviewee if they came from a non-finance background, but the firm is not all of a sudden going to change its wants and needs just to tailor the interview to the interviewee's strengths.

I would argue that small and mid-sized firms are more likely to test your basic knowledge of leveraged buyouts as compared with larger firms, which generally would have done their pre-screening as early as the resume review to see what type of financial background you've had. In fact, the fact that you are coming from a non-finance background behooves you even more to demonstrate that you know what you are talking about. If you say you want to do PE, you'd obviously have to be able to answer very basic questions relating to the three financial statements as well as your understanding of leverage. If I were interviewing someone and they had no idea how to run through some basic qualitative LBO questions, the interview would be over shortly thereafter.

As for lbo models, you won't see that in your first round; if anything, they might give you a case where you'll have a few days to prepare an analysis and a basic lbo model. As well, there were a couple of instances where I had a couple hours to put together an LBO model on the spot. They'll let you know ahead of time if you have to do stuff like this. You may not need to have known how to build an LBO model before since you don't come from a consulting background, but this is the backbone of PE and if you can't convey how LBO's work at least on a high-level, you are probably toast.

Nov 26, 2013

I had an internship at a small PE shop in Washington DC.

Questions:

  1. More strategy. While you'll be doing the modeling, that's the easy part. They want to know more about how you analyze a company (5 Forces is a good paradigm to start with) and how you look at an opportunity. As an analyst as a small firm, you're relied upon more to contribute to the few deals they do each year.
  2. brainteasers. I think this might have been unique for most buyout shops, but still. As always, they want your thought process and to know how able you are to come up with a reasonable answer for say, how many slices of pizza are consumed in America every year.
  3. Finance questions: LBO is the obvious choice. But more important than the model, they want to know the intuition behind leveraging up a company, when things can go wrong, and the differences between putting cute things into a model and making assumptions, and how you test the validity of those assumptions and their likelihood of coming through ad hoc.

Good luck!

Nov 26, 2013

Thanks numi, alphaholic. Most of the above advice is very helpful. I feel confident in high-level strategy and LBO/investment theory type discussions. My primary concern is making sure my non-banking/accounting background doesn't knock me out of contention.

Nov 26, 2013

Well, they must think you have enough potential if they're giving you the interview. If you worry about your background knocking you out of contention, then you probably are not much of a contender to begin with, to be frank.

Just do your best in coming across as someone that's thoughtful and understands when/why leverage is used, and like Alphaholic said, show that you possess the intuition of an LBO investor and that you can articulate what traits make a particular business more suitable for a leveraged buyout, and what aspects of a company's financials or market opportunity might render it an unappealing investment. Your consulting background should teach you how to think about things like growth opportunities, competitive dynamics, market opportunity, supplier and customer concentration, and so forth -- these are ALL things that matter to a buyout investor in some way or another. It's up to you to decide how to prioritize them.

Again, the employer will determine whether you're a good fit. If they don't hire you, then you just weren't the right fit. But nobody can begrudge you for doing the best that you can do, so don't get too preoccupied with other people's expectations and focus on highlighting what you can bring to the table.

Nov 26, 2013

Coming from a banking background, most of my questions in PE interviews were related to deals I've closed. That said, I was very frequently given the following:

1 - Talk about an industry, any industry, and the investment dynamics and why it would be good/bad to make an investment in that industry.

2 - Take company XYZ, they provide services A,B, and C: What keeps me up at night? Give me a basic SWOT (they love the SWOT).

3 - I own company XYZ now, and I'm looking to purchase company ABC (both companies will be described in detail). What are some key things I should consider looking at to determine if this is a good add-on acquisition? How much would you pay?

4 - You have the opportunity to meet with the CEO of company XYZ and only have enough time to ask him two questions. What questions do you ask? (Note, this is an industry specific question, so there isn't a standard answer for this).

5 - Guy flipped over my resume and had me walk him through an lbo model. Then said if he was reviewing my LBO model, where would he attempt to poke holes in my assumptions?

Other misc. questions include:

Walk me through your resume.
What do you look for in a PE firm?
Why our firm?
What are your strengths/weaknesses?
What would your deal teams say about you if I were to call them up right now?
Where do you want to end up in 5 years?
How many hours a week do you currently work?

Nov 26, 2013

I heard: "Tell me how you make money in [industry]" for an industry I had worked in repeatedly. I was also asked to walk them through how I would think about some of the deals they looked at during the past year.

Nov 26, 2013

i had a PE interview but it was leaning more towards securitzation.

1st round
describe what i did at prior firm
why PE, what do u see yourself doing 5 years down the line
walk him thru DCF
explain wacc
CFA Level 1 ROE type questions

post 1st interview.
1. build a cash waterfall model
2. SAT scores
3. financial statement corrections

2nd interview
very general, very behavorial
(bombed it)
was asked 2 questions.
1. walk me thrun your resume
2. any questions
i did not sell myself....

Nov 26, 2013

and also a writing sample

Nov 26, 2013

I'm not sure what your situation precisely is, but hopefully my experience will help you out. I'm an analyst in S&T at a bank who strongly considered working for a small hedge fund instead. Here is why I didn't:

1) Career prospects

Basically, if you start at a no name fund and things don't work out, you will have a hard time getting a good job elsewhere. On the other hand, if you are start at a BB, you can make money either by going to a hedge fund later on or just rising up in the bank.

2) Training

Banks have formal training programs that small hedge funds can't offer. While it's true that you'll learn a lot working at a small fund since you'll probably be involved in the nitty gritty, I personally found my bank's training program quite useful and am glad I went through it.

3) Money

It is very possible that you can make more money at a hedge fund. The fund I was considering was willing to offer me about double what first years got at banks in 06. However, you should realize that a year of bad performance can lead to the dissolution of a small fund, so you should take any offer with a grain of salt. I'm pretty confident that even with the whole credit crunch, my bank will be around next year.

Nov 26, 2013

Just curious. Saw a listing with career services.

Nov 26, 2013

How big is the fund? How big are the equity checks they are writing?

Nov 26, 2013

They are quite small. They target control positions in companies with Enterprise values under 50M. I am also wondering whether my work being directly involved in deals with be looked upon favorably by a mid market PE firm, regardless of the deal size.

Nov 26, 2013

keep in mind this is Canada

Nov 26, 2013

if you get good experience I'm sure you won't have a problem to move on to a bigger fund.

Nov 26, 2013

dude you will be fine, it's great experience

Nov 26, 2013

Good experience, and still only six months out of graduation. You don't want to be unemployed one year out, take it and move on in two-three if that's your goal.

Nov 26, 2013

You have no job now, take the job... lol

Nov 26, 2013

Congrats on getting the offer!

You need to understand that a good firm, a profitable firm, and an attractive stock investment can be 3 unrelated things. -Epicurean Dealmaker

Nov 26, 2013

Sounds like a good learning experience to me. Take it!

Nov 26, 2013

The question is... why is EBITDA negative? If it's earlier stage, then focus on VC firms (maybe growth equity).

If it's negative b/c the company performs poorly and is in need of a partner with restructuring expertise, then you want distressed funds (HF or PE), though they generally look for larger deals.

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Nov 26, 2013

Ya sorry should have clarified. I dont want to give out too much information but it does have 10-15 locations and a couple of the locations are doing very poorly thus losing money - and yes that has been the problem... some have said come back when shops are closed thus profitable or when they open 5 or so more and its larger and can hit profitability again

peinvestor2012:

The question is... why is EBITDA negative? If it's earlier stage, then focus on VC firms (maybe growth equity).

If it's negative b/c the company performs poorly and is in need of a partner with restructuring expertise, then you want distressed funds (HF or PE), though they generally look for larger deals.

"If you survive to my age and you rack up a CV like mine, you can look at HR and say, "Fuck you. I don't try out."- Eddie

Nov 26, 2013

Do you have access to databases to search for buyers (i.e. CapIQ, Pitchbook, etc.)? That would be a good place to start.

Even better if your group has a proprietary database.

Also, that sounds like it would be a better fit for an individual buyer.

Nov 26, 2013

That's a tough sale. The space between venture...so say, zero EBITDA...and $2mm of EBITDA is, in many ways, a no man's land. Consequently, I would love to play in that space, because I think there is a lot of value to be extracted since you can take a larger chuck of the company, like a VC, but have reduced your risk with a partly proven concept, unlike most VC.

Anyways, I'm not sure of any sort of database. There are some smaller shops that might deal with this size company, but the negative EBITDA is going to be tough. One option would be to start searching for firms that operate or have expertise in that particular space/industry, since they would be much more likely to see the potential upside.

How you go about that is another question, but the databases previously mentioned would be helpful, though you might not have access to any of that. You could also do something as simple as a Google search for "restaurant private equity fund" or whatever the industry is, and see what comes back.

Obviously the latter isn't a surefire way, but sometimes finding a thread and pulling on it long enough turns out to be the right formula.

Regards

Nov 26, 2013
turtle:

Hi guys need help with something. Where could I find a list of PE's interested in companies with a size of roughly 7-10MM and a negative EBITDA? It can become a very profitable shop with scalability and the last PE that looked at it was very interested if it wasn't such a small investment, with that said most of the PE's I have dealt with will not look at this transaction. Any guidance or advice would be greatly appreciated.

has the company historically had better performances?

one shop that comes to mind is balmoral funds, a small distressed shop out in LA. but this will probably be too small for them

I've found databases like capiq don't have great/accurate info about smaller companies or PE shops. A lot of times you just have to reach out and see if you can get referred to a guy

Nov 26, 2013

Balmoral came to my mind as well.. also, BlackStreet in MD and Boyne Capital in Miami.

Also could be a deal for a Family Office, but that list is much tougher to find.

Nov 26, 2013

This is going to be a really small deal, even if the seller gets 1x Sales, which may be unlikely depending on the industry.

I would target individual buyers. If you have a teaser, shoot it over. I have a solid proprietary list.

Nov 26, 2013
peinvestor2012:

This is going to be a really small deal, even if the seller gets 1x Sales, which may be unlikely depending on the industry.

I would target individual buyers. If you have a teaser, shoot it over. I have a solid proprietary list.

Unfortunately It would have to be approved by MD and "a guy from WSO'" is not a solid excuse haha thanks for the help though!

"If you survive to my age and you rack up a CV like mine, you can look at HR and say, "Fuck you. I don't try out."- Eddie

Nov 26, 2013

Thanks for all the good info. I have limited access to the databases as I work in a MM shop that doesnt really rely on them. We have focused on high net worth and got some interest but management would rather have someone with the right restructuring expertise from a PE. It does have historical success and after all the modelling and due-dilligence I wish I had the money to buy it myself - great little company but hard to get interest from PE when dealing with this size

"If you survive to my age and you rack up a CV like mine, you can look at HR and say, "Fuck you. I don't try out."- Eddie

Nov 26, 2013
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Nov 26, 2013
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"If you survive to my age and you rack up a CV like mine, you can look at HR and say, "Fuck you. I don't try out."- Eddie