LMM PE compensation, recruiting and port co. work
What can one expect when transitioning to a LMM fund in terms of hands on port co work, hours, current valuation environment, comp and the recruiting length and process?
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This might not be the answer you're hoping for, but you can expect that the variation among firms in the lower middle market is going to be pretty high across all the attributes you mentioned.
Some LMM PE firms are very hands-on with portcos; some are spread so thin across their investments that they basically show up to board meetings and try to remember everyone's name. Hours depend a lot on the senior partners - if they made their bones in a sweaty culture and they learned how to leverage that system to their advantage, then get ready to sweat; if they didn't like that culture or never experienced it in the first place, then you could be walking into a lifestyle firm. Comp is generally below street, but there are outliers. Recruiting length and process is a total wild card.
I won't touch valuation environment. It depends so much on sector, sourcing model, and investment strategy that any general answer you get won't be very helpful.
Any takes on the degree of below market comp (aka how far below)?
Very spot on. Agree. There's going to be a lot of variability on hours and pay, but most folks I know in both pre and post MBA positions are relatively in line with the market in terms of pay with pretty reasonable hours. If you're in a Tier 1 market expect comp relatively in line with market as there isn't a ton of room to move on that unless they're granting some carry given where banking pay is currently. If you're going to Jacksonville, that may be a different story.
bumping
Curios as well. For any LMM PE guys, would love to see any breakout of comp and fund size if applicable.
https://heidrick.com/Knowledge-Center/Publication/Private_equity_compen…
I prefer individual data points myself, such as the WSO company database, but the data is scarce for LMM PE. The Heidrick report is the next best thing.
Still super informative. Thanks a ton.
Great link, thanks.
Thanks for sharing. This is super helpful.
Totally depends but would expect all-in comp to be in the 150-200 range at the associate level - there are obviously outliers on both ends though
Two of the partners at my firm are ex-LMM guys and were clearing 300k+ iirc. It really varies though.
Comp is generally lower but I know some funds that offer a fair bit of upside and that upside can make you a lot of money.
300k at what level?
Associate.
What should one expect for a 2hr lbo / case study and a 4hr lbo / case study and presentation? LMM
2hr: Roughly thinking 15mins to read and summarize assumptions and 90 mins to model, 15 mins to summarize recommendation
4hr: full 3 statement with 45min to put together 3-5 slides
I recently went through MM and upper MM recruiting, and had 2 shops that expected a 3 statement in under 75 minutes. Not sure if this is the norm, but would say that a 3 statement model can be expected in a 2 hour case. PM if you would like more detail.
I'll also just note, that they level of detail of different models is impossible to predict. I've seen full models where the balance sheet has 10-15 lines, others where it's a real 20-30 line model.
In general most places try to make it so that if you aren't smart with your time, you won't be able to finish. My advice is always to not focus on formatting first (do it last if you have time) and get to the "answer" as quickly as possible (i.e. if you don't think you can do a full BS then just get to cash and build out your debt waterfall and get to the equity returns).
Who else is currently recruiting for LMM? What region? Targeted Fund verticals?
Midwest Industrials and Healthcare
bumping
Bumping. C'mon WSO, hard to believe we can only get 1-2 informative posts on this subject.
Received offers from LMM / MM PE. LMM 1st year total comp (300m - 600m fund size) can range between $150k-$190k. These shops generally have 5-10 people total. YMMV.
Did either discuss carry or possibility of co-investing at all?
one talked about co-invest. neither about carry. I don't think it's very typical to get it as an associate unless it's
Have a good friend who is an associate at a LMM fund (~300M) in a low COL area (think something like OKC or similar), and he makes around 125k-150k all in. Not too bad when considering COL is low and hours are probably 60 on average and 80 a few times a year.
1st yr Associate at a LMM fund ($350mm fund, AUM $1B) in a tier-2 city (think Miami / Austin).
Base: $100 Bonus: $80k target (though they exceeded this by 20% pro rata) Co-invest opps (w/o fees) on a per investment basis.
Agree with the other comments above re: variability in the other factors you mentioned. I'd say an average week is 8:30am - 8 or 9pm, but that usually puts me as the last one in the office. Split between new investments, portco work, firmwide projects and admin BS is about 60%, 20%, 10%, 10% respectively.
Hope this helps.
This is really helpful. SB.
I know it varies, but would be curious to hear about other people's experience with LMM shops in tier 2 cities (Dallas, Charlotte, Atlanta, Denver). Is 50 - 60 hours and this pay generally in line? Also, is there still the banking culture of "always being on call" and plans getting blown up?
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