Merits of banking once you've secured a PE associate role for July 2018
I joined a large investment firm out of college and am considering whether or not I should do banking for a year.
Background: I interned at a bulge bracket bank for three summers (senior year of high school, sophomore year, and junior year) and went to a target school. I lack family connections in the industry and recognize that I got very lucky along the way. I made the jump to the buyside for my full-time job given the exposure and learning experience I foreshadowed getting.
While the firm makes traditional PE investments, our sourcing mechanism has not benefited my team and I have been mostly staffed on business-building, fund investing, and co-investments since joining. Realizing this, I took part in the 2018 recruiting cycle with my peers in banking and accepted an offer at a middle market fund I am happy with. The start date is in summer of 2018.
Will I be at a disadvantage when compared to the bankers in my start class? What can I be doing in my current role to compensate? I have considered leaving my current firm to do a year of banking (granted, I realize this is easier said than done), which I would have to start recruiting for in the next couple of weeks.
I appreciate everyone's insight in advance!
Just try to get staffed on new investments (including co-investments) and maybe some of the more challenged/hands on portfolio companies. I wouldn't worry about getting a new job just to get experience.
Why would you want to get involved with the "challenged/hands on" portfolio companies? I feel awful for the guys who have to help manage portfolio company crap when most people want to do PE for the deal experience.
"Challenged/hands on" portfolio companies suck your time away to work on often dull stuff without clear transferable skills that you can take to work on other deals.
Because portfolio management is just as important as making the investment itself? You don't congratulate someone when they do a deal; you congratulate them when make a successful and lucrative exit.
"Why would you want to get involved with the "challenged/hands on" portfolio companies?"
Because OP is asking about what makes for the best experience, so you should want to be in situations where you can be as hands on as possible. With a lot of well performing portcos you can kind of just sit back since mgmt is doing a good job, but that also means you won't learn as much in general.
As a junior PE guy, here's the thing: no one is going to give you credit for being attached to home run investments. Half the time those investments were made before you even joined. Even if you did work on the initial investment, it's still not really that impressive unless you sourced it - building a model and managing a diligence process is frankly not that distinguishing of a skillset. OTOH, you can add a lot of value and also learn a lot more if the PE firm has to take a more hands on approach with a portco that is struggling.
"without clear transferable skills"
Lining up rescue financing is a transferable skill and a good experience to have as a junior guy. So is doing a reorg or restructuring. So is creating and overseeing a turnaround plan.
Lastly, most people don't do PE for the deal experience; they do it for the investment experience. If all you wanted to do was deals, then either go back to banking or find a firm with a dedicated PM team (of which there are relatively few).
If you were doing investment work you are actually ahead of banking analysts.
This is what I am hoping but I rarely see people who come out of co-investing/fund investing land into traditional PE roles. This may be a matter of sample size, however... i.e. there is a bigger pool of junior bankers in the world.
Yeah I see no reason to do banking for a year given the seat you are currently in. My peers and I working on live m&a processes all talk about how we really aren't learning all that much, and I'm sure it's nothing that you haven't seen or won't be able to pick up on quickly based on your experience.
This is relieving to hear from someone who is currently banking - what do you feel like you are gaining from the job outside of working on tight deadlines/managing different work styles? Modeling?
1) A year of banking will not help you much, if at all 2) I think it could be damaging to your professional reputation to take a banking role just to use it as prep work for the MM PE job. Would also be really awkward to explain to the MM PE firm when/if it came up 3) the experience you would get is unlikely to be very valuable. This is particularly the case because you would be even less motivated to do the stupid crap every junior banker hates doing (since your reviews would mean nothing).
If you're going to take time off, please use it to travel or something. It makes my heart hurt to think that, after spending most of your post-high school summers at an IB, you'd rather do monkey shit for a year than spend some time enjoying your younger years.
+1
Point 2 is eye-opening - I do think my current firm could supportive but it would be odd in the eyes of the MM shop since they hired me expecting I would have a certain skillset coming out of my current firm vs. banking.
For point 3, what kind of work are you referring to junior bankers doing that would be helpful if I had the motivation? More context around what people actually get out of a banking program would be helpful.
Ah, yes. I have thought about taking time off to work at a start up in London/SF and/or travel in between my current job and the MM firm since I haven't gotten off the treadmill since high school. To your earlier point about professional reputation/awkward conversations with the MM firm, do you think this could raise a red flag in their eyes?
Q: For point 3, what kind of work are you referring to junior bankers doing that would be helpful if I had the motivation? More context around what people actually get out of a banking program would be helpful. A: There's a lot of intellectual grunt work (e.g. excel/PPT skill) that, in my opinion, are built out of endless, soul crushing repetition. Said another way, you learn to be fast/efficient as a means of coping with your insane VP/associate forcing you to iterate a pitchbook 40 times, despite the fact that the pitch is VERY low probability. Unless you're a sadist, you get through this by telling yourself it will pay off in your bonus and review (since your review could well have implications for your transition to the buyside). This motivation would be much less salient for you.
Q: To your earlier point about professional reputation/awkward conversations with the MM firm, do you think this could raise a red flag in their eyes? A: At the very least, it's a 50/50 chance. Best case, they think you're a bit overzealous. Worst case, they perceive you as having been disingenuous with a prior employer or, potentially worse, start to wonder why you thought you were unprepared after spending time on the buyside (e.g. start to question whether you were lying about your responsibilities at the other firm).
It just doesn't seem like the upside is that great, and the potential downside could be meaningful.
bumping this
NO, NO, NO. Echoing what people are saying here. I came from top NY BB group and worked at a large NY megafund. The main transferrable skills from banking to a MM PE job will be lbo models and organizational skills. You can probably build a 3 statement lbo model, if not, do a bunch of practice just to get some laps in so you are fast and sharp when you start your new job.
You will maybe gain 5% incremental new skills from banking, and spend 95% of your time spinning wheels, updating books at 3am and wondering where you went wrong.
Also mirror that you should take some time to travel. Quit your current job 3 months early. Your new fund won't care, in fact will like that you start the job refreshed.
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