LMM PE to MBB Post-MBA

Anyone make this switch after an MBA? Have seen a couple of LinkedIn profiles with this change. Some reasons I am considering this is: 

  • Not as steep of a pay drop from LMM PE Senior Associate Salary (300-350k) to post MBA MBB associate (200-250K)
  • Lower stress/hours at MBB
  • More variety of work/industries, decreasing interest in finance only
  • More international travel (most LMM shops are US/Canada only)
  • MBB recruiting process (especially from PE) a breeze compared to the competition of getting a Post MBA PE position
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Comments (23)

  • Associate 1 in PE - LBOs
Oct 15, 2020 - 7:38pm

Used to work in consulting

  • Lower stress/hours at MBB

Different type of stress, M-Th travel wears down on relationships in a different kind of way. Some people's partners prefer them working all hours but getting in bed with them at night, some are fine with getting plenty of attention F-Sun but being gone during the week. Food for thought. 

  • More international travel (most LMM shops are US/Canada only)

This is generally a downside unless what you're attracted to is the prospect of doing business in countries other than your own in which case there are probably better ways to achieve this. The travel is generally not fun and the sexy patina of hotel points and miles wears off quickly.

  • MBB recruiting process (especially from PE) a breeze compared to the competition of getting a Post MBA PE position

So true, god the MBA associates I worked for back in the day were actually retarded 

  • More variety of work/industries, decreasing interest in finance only

True unless you get hired into a group which is less common at MBB but not impossible. If this is interesting to you, consider Bain (you don't specialize until 3+ years post MBA and can often specialize in two industries). 

  • Not as steep of a pay drop from LMM PE Senior Associate Salary (300-350k) to post MBA MBB associate (200-250K)

This is one of my contrarian opinions but I think the equivalency point of where MBB partners make more than PE partners would be surprising to people (in terms of say, AUM vs. "your average partner" - to tell the truth I've tried many times but making a detailed comparison is useless). I knew plenty of partners growing into management making $5m/year (I did grunt work for the partnership group so got to see some sausage making).

I've made this opinion elsewhere and I'm sure it's going to get shit on here too (unsurprisingly, making the comment that consulting is more intellectually stimulating than PE, in a PE forum, is frowned upon) but I think consulting is more intellectually stimulating than PE (cue the monkeys saying "well I heard"... that's great, that's probably true for the data point you heard).

Honestly, not a bad idea based on the line of reasoning you've laid out. You've clearly given it some thought and it seems like the right move for you.

  • Analyst 1 in IB - Gen
Oct 16, 2020 - 10:28am

I've posted this a number of times and for some reason nobody ever responds with anything coherent-- can you please explain what makes consulting "interesting" or "intellectually stimulating?"

I hear this all the time, and ask people to clarify what they mean, and I have yet to receive a response. People tend to say this and then give nothing to support that belief...

  • Associate 1 in PE - LBOs
Oct 16, 2020 - 10:38am

I think you asked in another thread and I thought you were just stirring the pot and so did not respond. Sorry. Here is a real answer:

  • Problem structuring much more cerebral
  • More varied work functions
  • Focus on "high level" (e.g., competitive strategy, no getting in the weeds on finances, who cares, that's their problem)
  • No focus on ownership or implementation (breezy work experience)
  • Better overall culture of consulting firms seeps into day to day work
  • Development of speculative theses and subsequent primary research is somewhat more academic / cerebral (e.g., different than spinning up with a couple GLG calls, this ties into problem structuring)

I could go on if this doesn't clarify, but I think this should be enough to crystalize why for some people it's more intellectually stimulating.

  • Analyst 1 in IB - Ind
Oct 16, 2020 - 3:57pm

Very interesting- thank you. How much would you say the average MBB partner makes? What is the "equivalency point" as you mentioned? 

  • Analyst 1 in IB - Gen
Oct 18, 2020 - 1:01pm

This is a great post. Just curious - were you able to find some sort of generalized AUM cut-off when it came to PE partner vs. MBB partner comp? I've come to the same conclusion as well and was surprised to see someone else share this opinion as well. I do feel like, unless you're at a great UMM / MF, there's a good chance an MBB partner / BB MD would make more 

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  • Associate 1 in PE - LBOs
Oct 18, 2020 - 3:22pm

The cutoff depends... you would have to model it out on a case by case basis. Let's say you are a high performing MBB partner but not a managing partner and you are making $3m/year. That translates to $15m / 5 years. 

Let's say you are at a $500m fund that has a ~20% IRR and returns $1200m (roughly). Of the $700 gain, your firm keeps 20%, or $140. You have 10% of carry, so you get $14m over 5 years.

Funny enough, I came up with those numbers on the fly, but you can see my thinking. I am really not interested in a conversation of %s, fund returns, earnings as a partner, etc. That's my point - it's nebulous, just plug in your own numbers and roll with it.

  • Analyst 1 in IB - Gen
Oct 18, 2020 - 9:06pm

do partners at MBBs make more than MDs at BB/EBs? if so, why do people say they're pursuing banking long term over consulting because it pays more?

  • Associate 1 in PE - LBOs
Oct 19, 2020 - 10:54am

Again it depends. Comparing McKinsey to Deutsche is probably a false equivalency. Comparing BCG to a GS rainmaker, similarly. It is very difficult to equivocate.
 

Anyway, once you are a partner at an MBB making a few million per year in cash comp, you are doing fine.

  • Prospect in Consulting
Oct 19, 2020 - 1:19pm

Banking pays more at the junior levels, the difference is less pronounced as you climb the ranks

Oct 16, 2020 - 5:13am

Literally hundreds of my MBA classmates went into consulting, many of them at MBB. I won't comment on every point because it was already covered above, but I don't know a single MBB consultant who didn't put in pretty brutal hours for a few years post-MBA. I'm talking about team dinners that rolled into post-dinner working sessions that ultimately turned into 1am nights on a regular basis. Maybe my MBB friends are just overachievers, but this is far, far worse than anything I've seen in LMM PE.

CompBanker

Oct 16, 2020 - 8:30am

Agree here. I just came from MBB - definitely less stressful than PE overall but hours aren't that different

Array
  • Incoming Analyst in IB-M&A
Oct 16, 2020 - 6:12pm

Did most of your mba cohort that had pre mba experience go back to pe, or did many go to different industries like consulting?

Oct 17, 2020 - 6:05am

I can't think of anyone that transitioned from PE to consulting. I know that most of the people who did PE before school and wanted to do it after school got back into the industry.

CompBanker

  • 1
Oct 18, 2020 - 5:22pm

There are a number of people that have done this. PE isn't the end-all-be-all it's painted out to be. There are many individuals who are much better suited and frankly will likely have a better career at an MBB than they would at any PE firm.

As a illustrative example, you can think of dozens if not hundreds of CEOs / Presidents / Leaders across all functions of government / business (e.g. Mayor Pete) that are MBB alums (disproportionately McKinsey for what it's worth). The number is truly shocking if you do a bit of digging to see how many have at one point in time touched McKinsey. Outside of a niche world of finance, I don't think most educated people can name a single person who's a run of the mill MF / UMM PE partner aside from founding partners maybe (e.g., Schwarzman, Leon Black, etc.) 

Another way to look at it is a money vs. power vs. impact 3-D chart. I would say for an individual singularly focused on monetary wealth, PE is likely the best path on average. For a highly talented individual with a high IQ *and* EQ, McKinsey -> C-level role -> Government arguably has higher true 'influence' potential in the sense you can be in the driver seat of Fortune 100 companies that truly impact the lives of hundreds of thousands of employees and millions of consumers.    

Most Helpful
Oct 19, 2020 - 2:08pm

Interesting thread. Been in PE now for a bit and spent a couple years before this at MBB. Definitely not a common path for folks to be PE -> MBB, but I have met two people who have done this going from MBB -> PE -> MBB again. 1 of them wanted to have his b-school paid for by MBB and the other just hated PE and wanted to work with clients again solving their problems. Definitely different reasons, but all I'm saying is that it happens. 

On how it's different - they are truly two different beasts. The pace of MBB is a lot faster. What I mean by this is that the pace M-Th is breakneck. No downtime. Didn't even have time to go to the bathroom or eat lunch for more than 15 mins a lot of the time. You're preparing slides and analyses for a client meeting that happens every 2 days (twice per week mid-level client meetings) and then 1 big readout to the senior clients every 2-4 weeks. You are iterating on pages and analyses for problem solving sessions with partners that happen every day. This means you come out of a client meeting, work on the next analysis, make a bunch of pages, get them ready within 4-5 hours to run through with the partner, then iterate on it in the evening, send it out to India to get the slides prettied up, and then send back to the team for review. Then you talk to the client through these things that next day. There's literally no stopping from this pace for 6-12 weeks of your project. Then it happens all over again with a new project. 

PE on the other hand has huge peaks and valleys. When you're getting to LOI, you're cutting the dataroom like crazy and building the model, etc. But when you're just doing the day-to-day, you have a lot more control over your time and hours. Nobody is checking in with you every 3-4 hours to get your "latest analysis on XYZ" when you haven't even put in an IOI yet. There's also just a lot of waiting around for deals to come across your desk or for deals to heat up. No such waiting around in MBB - beach time rarely happens. 

The thing that PE has over MBB is that you have to really care about your analysis much more. In consulting, you're working on the 80/20 rule - the answer needs to make sense, be backed by data, but you don't need to live with the consequences of those recommendations. That means sometimes you simplify the problem, or you don't answer a question that's just too hard to answer, but you get the answer 80% right. Well, in PE, getting the answer 80% right leaves you with a 20% chance that your investment is going to be crap - so that doesn't really fly. The diligence needs to be as airtight as possible, and you'll push to make sure the analysis goes as far as you can take it - if it were MBB, you might've just stopped after you went 2 layers deep. You also get to be engaged at the board level with several companies at once and you ultimately have control over what the company does. Yes, this might happen if you're a senior partner at MBB (but that'll take a lot of blood sweat and tears to get to), and even then, you're just an advisor, not THE person who is running the show at the board level. 

I think they are two really different beasts. If you want to get more projects, see more variety of clients/industries/business problems, MBB is the way to go. You stay higher level, but it also means you get to touch and learn a lot more things every 12 months. PE, you might dig deep into 2-3 deals in a year (like really deep) vs. 6-8 projects per year at MBB

Comp wise, they're kind of equivalent. Associate pay at MBB is 175-250 with tenure, manager is going to be 250-350 with tenure, junior partner is 350-450 with tenure/some profit share, and then early tenure partners at MBB are around the 750K mark. Then 5-7 years later once you're senior partner, that's when you can comfortably make $2mm per year, with some upside for $5mm+ if you're a big moneymaker. It only takes 6-8 years to make partner at MBB, so the progression is a lot faster than the 9-12 years in PE it takes (e.g., 3 VP, 3 SVP, 3 Principal). On a salary/cash comp perspective, MBB is pretty freaking good. If you think about PE comp at most shops, without carry, VP is probably about 300-450 (depending on shop), principal is 500-750K, and partners are anywhere between 750-2mm per year depending on shop size/comp structure. Obviously carry + the ability to co-invest and double your money every 5-7 years is pretty incredible, but from a straight cash comp/salary perspective, MBB holds its own. 

The other thing that is important to note is that MBB is not a walk in the park. Making partner is hard work. Making senior partner is even harder. Developing an area of expertise and becoming a trusted advisor to clients is not easy - you'll also need to impress the partners and senior partners you work with every time. There's also a decent amount of luck involved, in terms of working with a client who has the money to constantly pay for your work vs. aligning yourself with a client that suddenly cuts back on discretionary spending (imagine Boeing or cruise lines today). 

This is a super long post, but just thought I'd share my two cents on this. Both careers are good, no doubt, just very different. both will pay you well. One is advising role, the other is an investing role. Different skillsets and different beasts to master. 

  • Analyst 1 in IB - Gen
Oct 19, 2020 - 4:24pm

Very helpful. Kind of curious to see what the general thoughts are for an IB career as well compared to these two.

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