MM IBD (Analyst) > MM PE (Associate) > MM PE (Senior Associate) - Here to answer any and all questions!

WallaWalla69's picture
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Currently a Sr. Associate at a well-known $1Bn+ shop. Long time lurker and first time poster. Given all the misinformation and misguided advice so prevalent on this site, I'm here to (hopefully) provide some real advice to private equity hopefuls. AMA!

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Comments (47)

Sep 29, 2017

Thanks for doing this. Just to start things off, would be interested to hear more about your background, your experience in IBD (groups, type of firm) and your recruiting experience. Any particular motivation for the move?

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Sep 29, 2017

Started off at a non-target state school, but fortunate enough that some of the better known MM banks (think Moelis, HW, PJC, etc.) recruited on-campus. After an absolute cage fight to claim one of the ~3 opportunities available for a SA gig, I spent the summer working across healthcare, industrials and technology verticals. It wasn't my favorite thing, but PE was always the goal and you more or less need to pay your dues to get there. I ended up spending two years working as a FT analyst in a industry coverage group, before making the switch to a larger value-oriented fund (think Sun Capital, Gores, etc.) Pretty quickly into my Associate stint I realized that I absolutely loved the industry, but wasn't necessarily enamored with the firm at which I was working. That, combined with the fact that my firm only hired VP-level candidates that were post-MBA were the two major motivators for making a move.

Lateral PE recruiting is a very different beast than post-IBD PE recruiting. Out of banking, you are just looking to find a fund that will take you in order to avoid the dreaded third year as an analyst. Out of an Associate gig in PE, I was significantly more selective and focused on fit. I wasn't interested in moving somewhere that didn't have long-term potential. I also wanted to find a fund with a narrower focus (i.e. dedicated industry, focus on auctions vs. owner-operator transactions) and most importantly, a great culture. I was lucky enough to land an offer as a Senior Associate with a "its yours to lose" attitude to internal promotion. Candidly my hours are worse than when I was an Associate, but doing meaningful work at a firm where you have a future easily outweighs having to stay an hour or two later some nights.

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Oct 3, 2017

Thanks for doing this. Very helpful.

What do you mean when you said your old firm only hires VP-level people that were post MBA? Do you absolutely not want to do an MBA? If so, why?

Oct 3, 2017

My old firm only hires VP-level candidates directly out of MBA programs, vs. an internal Associate promotion route. This is pretty common at some of the larger funds.

I had 0 interest in doing my MBA. In addition to the laundry list of standard anti B-School reasons (i.e. opportunity cost, no employment guarantee, etc.) I realized I was already in the industry I wanted to be in long-term, so there was no real value to me from a rebranding standpoint. I actually took the GMAT to purely confirm I wanted to go the Sr. Associate (vs. MBA) route for the right reasons (i.e. not being too lazy to study for the GMAT), but even after doing well I realized I still didn't have interest in the MBA route.

Sep 30, 2017

Do you get carry? How much? Are you on boards?

Oct 2, 2017

Carry is pretty rare when you are <VP level in private equity. At the Sr. Associate level, I've seen that it is fairly common to receive carry ONLY when you are joining a vintage fund (i.e. one of the first employees in a fund in the process of fundraising), and that is largely to compensate for the risk of joining an unproven fund. That typically ranges from .2%-1% of the fund's carry (i.e. .2%-1% of the fund's 20% claim to overall returned profit).

I am not on any boards, although it isn't uncommon for someone with my level of expertise to be on a board. Candidly board seats are really not much more than a title / ego-boost, as generally the entire deal team will go to BoD meetings (regardless of whether they are on the Board or not).

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Sep 30, 2017

Pretty general question but did you enjoy your analyst stint? I know in hindsight you achieved PE, but was it worth it?

Heading off next summer to start full-time in MM IBD, and just curious how you viewed your experience in the "grand scheme of things".

Thanks!

Oct 2, 2017

Long answer short - yes, I absolutely did. Nobody truly loves the analyst stint (and those crazy enough to do so usually never leave IBD), but I was fortunate to work in a great group with excellent analysts who became lifelong friends. Yes there will be all-nighters and meaningless work, but at the end of the day (i) long hours are an occupational hazard of working in any deal-oriented environment, and (ii) a couple years of your life right out of college is a small price to pay to gain access to buyside recruiting. That stamp of approval of spending time as an analyst at a reputable shop is invaluable and I cannot speak enough to how important it is - even if you are able to swing a PE gig coming from a non-traditional route, you often may find yourself in an uphill battle against ex-analysts who are fluent with financial statements, understand how the M&A process works on both ends, and have interacted with management teams before.

Congrats on the offer and best of luck going forward!

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Sep 30, 2017

Hey thanks for doing this!

Do you have any insight on recruiting for PE your 1st year vs 2nd? Are there any downsides to recruiting during my 2nd year?

Oct 2, 2017

Assuming you are referring PE recruiting during your analyst years, it largely comes down to a couple main points.

  1. Most of the top shops recruit on-cycle (e.g. 12-18 months in advance) so you need to decide if you are comfortable doing a third year as an analyst. If you want to leave asap, it is best to recruit your first year to maximize your chances at landing at a good fund.
  2. Deal experience is pretty important in the recruiting process, and one big challenge for analysts recruiting in their first year is that they often just don't have deal experience yet, so definitely a balance. It is not impossible to successfully recruit without deal experience (we understand you haven't been working in IBD all that long), but its just one of those things that definitely helps.
Sep 30, 2017

Very general question here, but at what point into your IBD stint did you start recruiting for your first PE move? And did you go through headhunters or did you reach out to people in PE yourself?

Oct 2, 2017

I started preparing just a few months in. I was lucky enough that my group was actively solicited by headhunters, so I largely didn't need to leverage my own network. Headhunters typically have the best access to the best funds, so they are logical place to start. I would liken HHs to on-campus recruiting - it is a confusing, irrational and counter-intuitive process but one of those things you just have to go with.

Sep 30, 2017

How far can you punt a football?

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Best Response
Oct 2, 2017

When I was in college? Not past the line of scrimmage.

Once I was in PE? Through the back of the endzone.

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Oct 1, 2017

Thanks for answering questions!

I'm a current analyst at a MM +1Bn shop like yourself. Not a well known firm and I have no previous IB experience. From what you have seen in the industry, are there people who progress up the ladder or get hired with no prior IB experience, only PE? Do you think I can fill that gap in my experience, if so how?

Thanks!

Oct 2, 2017

Absolutely - in my opinion, IBD is largely a stepping stone to PE / buyside recruiting. Is it helpful to have that experience? Absolutely. Is it necessary? Absolutely not. If you are looking to stay long-term at your current role, nobody at your firm will care one way or the other if you have IB experience, as long as you are doing a good job. From a lateral perspective, I would imagine it is still a great stepping stone (especially if you are coming from an Ares, Silverlake type analyst role), but I can't really speak to how it is viewed from a no-name shop.

That being said, the easiest way to make yourself competitive in lateral recruiting will be to get a deal or two under your belt at the current shop - no IBD analyst in the world can make a claim to playing an active role in a platform acquisition from a pure PE deal team lens.

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Oct 2, 2017

Very helpful advice, thanks!

Oct 1, 2017

How hard is it for a Post MBA IB associate to break in?

Oct 2, 2017

To be perfectly honest - it is hard. PE firms effectively want analysts that are extremely competent in MS Office / have a lot of deal reps, but are still malleable enough to be taught how to think from an investment perspective (or as my firm calls it "beat the analyst out of them"). Unfortunately Associates are often viewed as being IB "lifers" that are too far along the sellside path. There is an additional perception that with no prior-PE experience, you would need to be hired at the Associate level, but given the MBA you are likely to be viewed as overqualified.

That being said, don't give up! I know a number of IB associates who have made it far in PE recruiting processes / landed PE roles after hard work and perseverance.

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Oct 6, 2017

+1 for "beat the analyst out of them."

Stamp collecting has always been a means to an end for me.

Oct 1, 2017

How did your comp change from the Associate to Senior Associate level?

Oct 2, 2017

As mentioned, the firm I did my Associate with was a value-oriented fund, and paid a bit below market. I still saw a significant bump when I switched to my Sr. Associate gig, but in my eyes Sr. Associate is the level at which annual cash compensation starts to level off slightly (still seeing major jumps Y/Y) and carry / co-invest starts to become an increasing component of your compensation package.

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Oct 1, 2017

How much did undergraduate GPA affect PE recruiting? For reference coming from semi-target and a BB for IB.

Appreciate the insight!

Oct 2, 2017

This one is harder to answer, as coming out of a reasonably well-regarded group meant I was probably going to get interviews regardless (and once you are in the interview, GPA doesn't seem to matter all that much). This goes doubly so for Sr. Associate recruiting when you have already (hopefully) proven yourself at two shops already.

That being said, one data point was that a couple analysts who had relatively low GPAs seemed to have a little more trouble getting through the resume screens. At the end of the day, I think it is pretty important, but not a dealbreaker for post-IB recruiting - more of a "check the box" that you are 3.5+.

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Oct 2, 2017

Thanks for the help.

  1. Can you give a comprehensive breakdown of your comp over the years (ranges are fine)? Really just trying to get a gauge of fund size vs. associate comp.
  2. I'm a college senior and an incoming analyst at a BB, where can I get up to speed on the PE landscape? Very few alumni are on the buy side and can't seem to find a focused source of information on MM PE outside of WSO.
  3. Can I PM you to discuss my own stats to hear your feedback?
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Oct 2, 2017

1.
Analyst 1: $70/$50
Analyst 2: $85 / $85 (this was when the whole market went crazy on analyst comp in 2014/2015)
Associate 1: $95 / $95
Associate 2: $105 / $110
Sr. Associate 1: $135 / $135

  1. I wouldn't worry too much about the PE-landscape now. You will learn this ad nauseum making buyer strips, running auction processes, etc. over the next two years. Additionally, rather than reading about fund reputations and "prestige" from college juniors on this website, learning the landscape while an analyst will also allow you to really understand how various firms are viewed, the culture at each fund you interact with, how funds act on a deal (i.e. how much work upfront vs. post-LOI), and most importantly the type of fund and work you actually want to be involved with.
  2. Go for it.
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Oct 2, 2017

Is the pay path better in IB then? At least until carry kicks in?

My uninformed view is that ppl have underrated the IB path wrt compensation relative to non-mega PE.

Oct 3, 2017

Curios to hear OP's thoughts - but in my opinion, no. But that's with a few qualifiers. I would say at the junior levels, IB and PE cash comp are very similar, but you have to compare apples to apples - for example, MM IB and MM PE or BB IB and MF PE. I'd direct you to the two reports WSO compiled on this for IB and PE. As you'll see, there's very little difference in the comp packages reported by analysts and associates in these reports. That said, there's definitely a wide range of cash comp (base + bonus) packages in MM PE, with the two largest factors being the firm's location and fund/AUM size. For this reason, if someone is working at a large, successful NYC-based MM PE fund, I'd wager they look at the WSO aggregate comp reports and are surprised with how low the numbers are. But I'd also say the same thing for a top-bucket analyst at a leading BB IB group. That's why, similar to analyzing deal comps, you can't just look at means/medians and assume that's what everyone in the industry is making. I'd also say there's a lot more that goes into my comp comparisons/thoughts than means/medians, such as taxes, cost of living, quality of life, etc.

Regarding IB vs PE comp, the paradigm shift is with the carry, as you mentioned. While cash comp may be in-line or slightly higher for IB over the near-term, IB simply has no comp mechanism that can match carry and co-invest. At the mid/senior levels, carry payments can be many multiples of annual base/bonus and it is much more tax advantaged (long-term cap gains, at least for now), which makes a huge difference in take home pay especially in high tax locales. In addition, with a few exceptions, mid-level IB professionals do not have a mechanism where they can invest money in their own firm/fund/deals and make ~2x or more ROIC over a four/five year time horizon while still making very good base/bonus and accruing carry. With fund co-invest opportunities, this is also often available to PE professionals.

I would agree with your statement about misconceptions regarding PE, because I know a lot of people who have mistakenly held the assumption that everything about PE is better (comp, hours, culture, etc.) than IB. All of this varies immensely by firm. But I also know plenty of smart professionals who would much rather take $10K or $50K lower in annual cash comp in exchange for several points of carry at a great fund. But the reality is you usually won't take a haircut when jumping into PE, unless the quality/size of the firm you're joining is much worse/smaller than your current employer.

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Oct 3, 2017

Thanks for the detailed answer.

I guess I remembered his example of Moelis and thought he came from elite boutique and forgot he said MM IB. That would have probably changed my question.

Oct 4, 2017

Happy to help. I posted a little while ago on the differences in MF and MM carry/comp here and why some people opt for MM over MF, despite the seeming disparity in annual cash comp. Won't regurgitate same points here, but I'll leave one last thought. What I've experienced is that professionals change how they look at comp as they get older, whether they realize it or not. Just my opinion.

For those who interned or worked summer jobs, $/hr was most often the measuring stick. You either find a job that pays a higher hourly rate or work more hours. As you graduate undergrad, you start looking at $/yr. In our industry it's more or less expected that you're going to be changing firms every 2-3 yrs in the early innings, so people get fixated on maximizing $/yr, while willfully abandoning the $/hr mentality (for your psyche's sake, I recommend never calculating this during your time in IB). For this reason, they look at comp reports to see which firm/group will offer them the best $/yr potential. However, when you've been in banking for a while, you often start to yearn for two things - a return to better $/hr (whether you think this way or not, work/life balance becomes a much more meaningful factor than maximizing annual cash comp) and better $/lifetime potential.

While my annual pay matters a lot to me, I'd echo what OP has said throughout that I'm much more focused on where I can move up the ranks long-term and accrue meaningful carry, because that will impact my net worth way more than my base + bonus. If you use a $1B fund as an example, the fund would make $200MM of carry assuming a 2x ROIC and 2%/20% structure. That's on top of $20MM a year to cover salaries/bonuses/operating expenses, etc. Pretty good gig if your MM firm has 10-30 investment professionals to split that pot. Especially true for the top brass who often take 10-20%+ of the carry pool (with some firms with founders still keeping 50%+ for themselves).

Regarding my $/lifetime comment, most senior finance professionals will agree that fund economics favor PE comp over IB long term. However, with vesting schedules and the way carry accrues, you can't continue to jump ship every 2-3 yrs in PE like you can in IB and still make the same economics. As jobless123 and OP mentioned, this makes picking the right firm/culture paramount and drives much more of the decision (again, in my opinion) than annual comp. Because if you're wrong about how your fund is going to perform or your ability to accrue meaningful carry, you end up wasting many years and feel cash "poor" at the end of it. If your goal is to maximize $/yr, it's tough to argue that there are many better spots than BB IB over the analyst/associate/VP ranks. That said, there's definitely survivorship bias, but almost all of the senior PE professionals I know would say they've done far better in PE than their friends/former colleagues who stayed in banking. But whether the PE gravy train will continue to be as attractive for my generation is a topic for another day.....

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Oct 4, 2017

Excellent post and I agree 100% with all of the comments made by AmoryBlaine. I would add that at some point, whether you make $250k or $300k a year as a mid-level PE Associate really doesn't matter at that point in time. Either way you are going to be able to spend freely, save meaningful $ and effectively sustain yourself until the carry $ kick in.

Oct 3, 2017

I agree 100% with AmoryBlaine's comments here. The only addition I would make is that from what I have seen, a MM IB mid-level Associate's comp often is a bit higher than a Sr. Associate in MM PE, but the lifestyle, future carry opportunities and actual work make that delta completely worth it.

Oct 3, 2017

I don't think people appreciate how long it takes for carry to become meaningful either. Most firms don't give carry until VPs (it's not like you're getting significant bps as VP either), on top of vesting schedules, hurdle rates, staggered exits, that initial carry you receive won't get fully distributed until ~8-10 years down the line. Of course, assuming you've continued to move up, you'll receive carry in new funds at higher bps, but that also takes time to realize. And the obvious fact here is carry is only worth something if your fund is making money. I know plenty of 35-45s mid level (Principles and down) that making a decent annual base and bonus, but are sitting on a lot of paper carry and still feel "poor". Clearly there's more upside in PE than IB in the long run, but I'm willing to wager most of us getting into the industry today don't make it to partner track (either self selection or pushed out).

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Oct 6, 2017

Thanks everyone for all the candid info. Very helpful.

You have mentioned vesting schedules a couple times now. What do they (the vesting "terms"(?)) look like? I am asking because if someone gets carry at one firm and then moves to another, do they lose all of their un-vested carry, similar to how a startup employee would lose their shares?

Also curious to hear specifics about this vesting schedule, and if this encompasses both regular carry and coinvesting. I'm guessing the latter is not subject to these restrictions.

Stamp collecting has always been a means to an end for me.

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Oct 8, 2017

We covered vesting schedules in some detail here. Hopefully this is helpful. Regarding co-investing, you are correct. If you are putting your own hard dollars in a deal/fund, your employer can't modify your return like other forms of comp (carry, bonuses, etc.). Though I would still view co-invest with a longer-term (3-7 years) payout horizon like carry.

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Oct 9, 2017

Incredibly helpful, very much appreciated.

Stamp collecting has always been a means to an end for me.

Oct 2, 2017

Can you speak about the timeline for your PE recruiting out of your analyst stint?

Oct 2, 2017

See my answer earlier to Keinishikori

Oct 2, 2017

Do you think you're on track to making VP and eventually partner? Do you plan on going to business school? Thanks.

"Truth is like poetry. And most people fucking hate poetry."

Oct 3, 2017

Firstly, thanks for doing this!

How do you envision the PE landscape changing over time (if at all?) I'm still doing my undergraduate, but there is plenty of noise surrounding technology / machine learning and AI. I understand that there are plenty of quantitative jobs popping up along the street, but am curious as to how the IBD Analyst -> PE Analyst / Associate career trajectory will pan out. Less opportunities for those who aren't quants perhaps?

With the exception of top and bottom tier PE firms, is compensation, generally always going to be better than it was in IB? I know people exaggerate about PE being 'money for jam' but I've heard of a few people who actually took a pay cut while transitioning (this is in Australia). Interested to hear what the general case is for large US cities (NY / Chicago / LA) in particular.

With the 'up or out' and high turnover rates prevalent at the BBs, how easy is it for one to climb the rungs at a PE firm? I always read about Analysts / Associates being stuck and never getting the opportunity for VP promotions (or just carry in general)..

Ignore my Title and Industry - I can't seem to change it under 'Edit Profile' lol

Oct 3, 2017

And please, speak as you might to a young child. Or a golden retriever. It wasn't brains that brought me here; I assure you that.

"Truth is like poetry. And most people fucking hate poetry."

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Oct 3, 2017

can you shed some view and perspective on how you lateraled from your shop when you were an associate to a different shop with the senior associate position? i'm currently in a similar position and have posted a thread below but have garnered no success yet. whether you have reached out via networking means, coffee chats, etc. or got the opportunity through headhunters.

also, how tough was it to ask your current firm to take you on? i imagine they are super selective given the competition plus post-mba folks with prior pe experience were dime in a dozen

Oct 4, 2017

OP - thanks for doing this. Very similar background to you, so curious to hear your thoughts on the following:

  • Now that you've had a chance to get under the hood in PE and form your own opinions, how do you view the long-term attractiveness of the PE industry?
  • What factors do you think are going to drive the internal promotion route the most? And how do you think this is different than lateral moves or gaining a promotion via joining another firm?
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Oct 9, 2017
AmoryBlaine:

OP - thanks for doing this. Very similar background to you, so curious to hear your thoughts on the following:
- Now that you've had a chance to get under the hood in PE and form your own opinions, how do you view the long-term attractiveness of the PE industry?
- What factors do you think are going to drive the internal promotion route the most? And how do you think this is different than lateral moves or gaining a promotion via joining another firm?

I'm not the OP, obviously but I thought these are 2 very interesting questions I ask myself pretty regularly as I grow in the MM PE space:

  1. I don't think there is much room to grow in the MF or even top MM PE space (from both a return and professional development POV), but there are definitely exceptions out there like LGP. I think from a pure returns prospective, lower MM build and grow strategy is, in my view, the best way forward. I eventually want to start my own fund some day and hell would have to freeze over before I move up market. In today's environment, I just don't understand how some shops are bidding 15x EBITDA and swallowing down banker's numbers just to get a mgmt meeting. I think this is both intellectually dishonest to your LPs and a very short horizon approach, which PE is NOT. As all PE pros understand, the transaction part is actually easy... It's what you end up doing with the business after buying it that matters. If you are buying at a fully-priced (or even premium) multiple, not much wiggle room. However if you view this from a GP POV, booking assets = fees, and dollars coming in pocket today > earning carry. Incentives are a bit misaligned, IMO. I am a firm believer mgmt fees are definitely necessary but getting deals done for sake of fees = no go and sets you up for failure. American Capital is a great example of this
  2. I will speak for myself since this is very situational. I think if you want the VP promote, you really need to step back from the models and all that shit, it should reduced to maybe 30% of your overall attention and you need to start trusting your senior associates to get it right. At the end of the day, you can't manage a business in a financial model, i don't care who thinks otherwise. as VP, you need to QB the deal process, including negotiating legal docs, on the transaction front. where you REALLY need to step up is the day-to-day mgmt of portfolio companies. you need to be able to move from a board observer to an active board member. Anyone can do a deal, but again, its what you do with the business afterwards, and that is either going to make you a hero or an asshole. if the partners can trust you to lead a portfolio company, you are essentially in the ranks of the partnership

i really hope this makes sense. fires in california is fucking with my brain and lungs

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Oct 11, 2017

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