My Path - MBA Banking Associate to PE

Hi All,

I'm a post-MBA banking associate that recently received an associate offer from a MM PE firm and wanted to share some thoughts as someone who was not coming right out of an analyst program. I have no pre-MBA banking / PE experience. I remember starting the process wondering how exactly to go about this, so hopefully this post gives you some ideas rooted in my actual experience. Will be a longer post but wanted to be more comprehensive.

Personal Reflection

Really think about why you want to do this, and if you have the desire and capability to be flexible. One of the reasons this move is tough is because a PE firm is thinking, "this person is too senior to be an associate, and they don't have enough relevant experience for senior associate / VP." The opportunities you come across will span those ranks, but in my experience it was easy to argue for an associate seat because any barriers in doing that are within yourself (ability to be more junior etc.).

Opportunities will span geographies, and many will not be in NYC – be ready for that reality.

If you come in as an associate, you will be starting at first rung of the ladder with no ability to delegate as you do now.

Pay will almost certainly be initially lower than what you are making now. For associate roles, would have in your head a target of ~$200-$275K depending on the size of the fund. Regarding fund size, while I did have a few touchpoints with mega-funds, you should expect that you will likely be interacting with LMM to MM firms in most cases. LMM firms will pay closer to the lower end of the range but you may have the ability to earn carry faster, while with MM firm pay will be at higher end of range.

Flagging these things first because they are likely realities of the switch that you should deeply consider.

Prep

Before any cold emails or communications with headhunters, I would recommend some prep work. First would update your resume and pick the deals that have the most relevance to PE (i.e. M&A where you had a large role in process).

Once resume is set, I would make "deal memos" for each transaction on your resume – for me this took a long time and wouldn't underspend on effort here. These memos are a separate doc that outline things like: deal overview, industry overview, valuation methods, financials (margins, growth etc.) competitive dynamics, investment thesis for buyer, impetus to sell for seller, answering if you think this was a good deal, answering if you would have done this deal / what you would have changed. In some cases these were 10+ pages long. Balance your in the weeds knowledge with being able to discuss a deal high level and explain your role. It's easy to get lost in the details of maintenance vs growth capex and miss the easy stuff of articulating the 10,000 foot view in a compelling way. This was my way of ensuring I knew my deals inside and out – this will be a focus area of your interviews.

Read about the industry / make a doc that outlines recent deals, leverage and EBITDA multiples etc. Will want to be conversational about all things PE when you are talking to investment professionals. This will also help you with case studies where assumptions aren't provided.

Get your "story" and related "why PE" locked down and make a list of your target firms. Start seeing if anyone in your network is connected to these firms and make a list of those people as well. Make a list of the relevant headhunters and their contact information for your initial outreach.

Headhunters / Initial Communications with Firms

Headhunters (HHs) will likely be the source of most of your interviews. Once prep is done, you should send a big wave of initial outreach emails to HHs. Note that some firms have a portal where you input all of your information to get in the system. Even in those cases, I recommend a personal email in addition to that. Just need a simple email on yourself with your resume, what you are looking for, and if they have time to connect. Something to recognize here: you are not going to be a tier 1 easy-to-place client, so you may need to try several different folks to make the connection. I also found that reaching out to more senior HHs was a better approach because they have "seen it all" and have the know-how to position you in the market relative to a new HH. Additionally, it may take an intro from a colleague who knows the HH to get the first conversation rolling. For example, there were some firms that I had emailed ~3 times to no avail, but I got a warm intro and soon had a conversation and multiple opportunities being sent my way.

When you do get HHs on the phone, they will ask for your story, why PE, what level of role you want, and what geo / type of firm you are looking for. Some do ask for a deal walk through, though I was never deeply probed on this. You are looking to make a really positive impression here so that the HH will go to bat for you and champion your candidacy. Time and again a positive HH relationship got me pushed to a first-round where the firm initially was on the fence given I was post-MBA.

From that initial conversation, you will be in their system and they will email you opportunities. Some will be much more productive than others – expect that several firms will send 2 or fewer opportunities over the course of several months. That is one reason why this move is tough, they have a ton of opportunities, but they simply can't intro you to all of them because many have hard "need current PE associate / 2+ years of PE experience" in mandate description.

Outside of HHs, start sending communications to investment professionals at PE firms on your target list! Your hit rate will be low, but just start sending them out and generating conversations. Also, reach out to your PE-connected network – even if it doesn't lead to a connection with a firm you will learn a lot about the space.

Interviews / Case Studies

Through a mix of HHs or your cold outreach, you will get funneled into the process at some firms. Some processes are more formal than others. For example, at one firm I had a series of informal phone conversations, then a case study, then a Superday. Others are more structured with more of a known number of formal interviews before a decision is reached.

As far as questions go, it will be a mix of behavioral, technical, deal experience, and investment questions. Since you got through banking recruiting, I'm going to not focus on the first two buckets, as you will be stronger here – just focus your technical prep on the LBO side of things (can go in more depth here if helpful). On the deal experience piece, doing your deal memos will get you sharp on these types of questions.

When I say "investing" questions, I mean things like:

How would you evaluate X business, given that it operates in Y industry, generates $100mm in revenue with a 20% EBITDA margin? Note: this type of question can evolve into a paper LBO, and you may need to make the assumptions on entry / exit, leverage etc. Be ready to ask follow-up questions on these types of Qs as well.

Tell me about one of our investments that you think is good, and other that is bad? Why do you feel that way?

What industry / company would you invest in right now?

These are questions you will have less experience with and are much more interesting / nuanced than what you encountered in banking recruiting. I would spend a lot of time here, as this will be the focus of much of the interview process and they really get to the core of the job.

Almost all firms will also have a case study component to the interview process. For prep here, would practice building ~10+ full three statement LBO models from scratch. I found using the Macabacus plug-in was helpful here because I was able to replicate the hotkeys I have on my work laptop on my personal computer. Would reach out to a trusted analyst for old case studies – the analysts pass these down from generation to generation, so they will be excellent source of old PE modeling exams. In addition to being able to model quickly and accurately, you want to be able to crank out a short investment memo as well. This should cover your recommendation, company / industry analysis, financial overview, risks / mitigants, further DD questions etc. On a real exam, you may be given an old CIM, and that will be the basis for prepping the model and memo. One way to practice this is to pull up a recent S-1 and use that as the CIM and build a model / memo around that. There will typically be a de-brief session after the case study where you have to present your findings to investment professionals, so be ready to do that and have your assumptions challenged.

For case studies, don't overweight the model. Unless explicitly asked for, don't add 10 cases, detailed balance sheet rollforwards and the like. Create something with sufficient detail that balances and then move to the qualitative component. You quickly learn that proficient modeling is table stakes at this level, you will differentiate yourself with insights about the business under discussion.

Superdays will literally take a full day in many cases, and you can easily be in a position to meet 8+ people at the firm. Not too much extra to say here other than dig deep, will need a lot of stamina to power through. Ensure that thank you notes go out at the end of the day.

Conclusion

If you make it through the above, hopefully you will have an offer or two in hand. Making this move is definitely possible and buckling up for a longer multi-month process is key. I do think that making the move sooner than later is better, as the pay and seniority gap won't be as large, and it is an easier argument for you to come in as a junior person. However, as someone recently said to me, "it's better to be on the right ladder than a higher rung of the wrong one" so if this is important to you and you've reflected on it, then go for it.

Happy to answer any questions and good luck!

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Comments (9)

  • Associate 1 in IB-M&A
Aug 15, 2021 - 5:42pm

This is super helpful. Thanks a lot. 🙏

A quick two-part question. Do you think the brand of your bank or group matter in the recruiting process? My understanding is as long as it's BB/EB, it's pretty much same but wanted to clarify. Assuming you're at a decent group, does it matter you cover TMT/HC/Industrial or does it narrow your recruiting for that particular industry? If so, do you think M&A group or EB generalist would be better to make that jump?

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  • Associate 1 in IB-M&A
Aug 15, 2021 - 5:55pm

On your first question, if you are at BB/EB, you are in a good spot -- yes, brand matters, but at that level, you have strong branding IMO. More is factoring into your candidacy than an analyst hire given your additional years of experience and prior career. I am at a strong firm, but I don't think my outcome would be different if I was at a different BB/EB with the same deal experience. What is key is that you have a handful of very good examples of you taking the lead in an M&A process, as that will demonstrate the transferable skills a PE firm is looking for. 

Regarding group, I do think it is easier from a story perspective to say you want HC PE because you are at a HC banking group etc, but for many groups, I found that I could make it into a process even if my banking focus did not perfectly align with the PE firm's investment focus. To your point, and related to my answer to your first question, getting M&A experience is paramount, so BB M&A or EB is a great place to start post-MBA if you have PE in mind. 

  • Associate 1 in IB-M&A
Aug 15, 2021 - 11:06pm

Curious about title you are expected to apply to. Are you going for an associate role where typical candidates with 2-3 yr banking experience land or is it more like senior associate role where those associate hires get after working there 2 years?

  • Associate 1 in IB-M&A
Aug 16, 2021 - 9:04am

My view is that you should be open to both to maximize chances of making the move. When having initial chats with headhunters, I recommend making it super clear that you are open to associate level (post analyst) roles in addition to experienced associate / senior associate roles. The way it works is that headhunters will float an opportunity to you, and if you are interested, they submit your resume to the PE firm. Then, the PE firm will decide if they want to move forward with you or not. In some cases, the PE firm is still figuring out exactly which level they want / will figure out what level is appropriate for you during the interview process. That is why I recommend going in with the most flexible mindset if you really want to make the move. 

Across my experience and friends who have done this, firms will generally be open to discussions around accelerated progression if you come in as an associate.

Aug 15, 2021 - 7:43pm

Could you PM me? Wanted to ask you some questions. Current MBA student right now. 

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  • Associate 1 in IB-M&A
Sep 9, 2021 - 10:42am

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