PE Analyst -> Associate

How is the process of lateralling within private equity any different from the traditional IB -> PE path?

A little background on myself. I am an Pre-MBA analyst at an industry specific PE firm that is well known among those who dabble in the industry. However, the firm is less known to those outside the industry as well as headhunters. In addition, the firm is not located in a major city (e.g. NYC, Houston, LA, etc). My instinct tells me that I'll have to network if I want to lateral given that most headhunters are probably unaware of our firm's existence. If that is indeed the case, should I be focused more on headhunters (who probably wouldn't be that receptive) or professionals at the firms I want to target?

A related question is how soon is too soon and what is the general rule of thumb for a PE analyst to associate lateral timeframe? Do I need to get at least 2-3 years under my belt to make the move to associate?

Would appreciate opinions and thoughts from those who have faced a similar situation.


Comments (27)

Mar 5, 2016 - 11:28am

Can you please give some background on the type of work you are doing as an analyst at your firm? The good thing is there are a lot more PE analysts nowadays at great firms (Vista, Altamont, nearly all the megafunds, etc.) so I'm sure head hunters are getting more used to placing them.

These are questions I would expect from anyone you want to have a serious conversation about lateraling with so please don't BS answers.

  • Did they put you through any type of financial analysis training when you started (either in house or send you to Training the Street, etc.).
  • Are you doing business development/sourcing more then 25% of your time?
  • Do you do portfolio company work?
  • Are you actually doing real deal work?
  • Have you worked on a deal from start through completion?
  • Can you build an LBO from scratch?
  • Do you have a decent grasp of key LBO transaction workstreams (legal diligence, regulatory diligence, insurance diligence, accounting/Quality of Earnings diligence), then traditional business due diligence (your firms analysis))
  • How is your financial analysis literary? Do you understand things like working capital pegs, debt covenants, comps, capex, FCF, etc.

How does your firm hire it's associates? Does it use head hunters?

I've lateraled twice in my pre-MBA career. I've seen the good, the bad and the ugly. From getting laughed out of the MD's office at a $50B AUM shop, to going from head hunters not responding to my emails to sending me weekly opportunities, to getting a job at an awesome firm because I met a cool associate at an industry conference 3 years before who later became a VP.

Happy to opine here.

"If you want to succeed in this life, you need to understand that duty comes before rights and that responsibility precedes opportunity."
  • 3
May 27, 2020 - 9:10am

in a similar situation as a PE analyst- I pretty much wrote off lateraling thinking it was a long shot. I can do all of the above/ have done except see a deal through completely (but it's bound to happen soon we are closing a deal soon, as well as exiting a different portco soon also), 0 sourcing, etc. at a MM firm (generalist except I can ask to work on whatever I want to work on at any moment e.g. if certain things are coming in the pipeline I can do DD on whichever sector I want). wondering what are the best steps for me? I'm in a tier 1 city btw. I haven't really had time to understand all the diligence required on all fronts (as in mastery) but have some sense- something I'll work on going forward.

do you have any other suggestions or things to focus on to improve lateral opportunities? it's a great form, reasons to lateral would be if I don't get promoted and the pay is low compared to bigger funds (200-300 for associates) and it just makes sense to go where it pays more if Im not in a partner track here (so to speak).

Appreciate any advice on how to generally approach the job / what to focus on getting out of the job to improve 'resume' the best (as in, what things should an analyst be doing to make sure they aren't getting pigeonholed as much or what can they do to maximize their own outcomes vs. always doing things that benefit the company only). thanks man!

Best Response
Mar 7, 2016 - 12:44pm

Looking forward to getting additional advice on this topic.

Prior to joining my current firm, I did the typical BB IBD summer program and was extended an offer. Declined it for a full time opportunity at the firm I am at now. I received informal financial analysis training, which was provided in-house. I do not do any sourcing since nearly all of our deals are sourced by MD/SVP, who receive deals from bank auction processes or private bilateral processes with strategic/financial participants. From a time allocation perspective, I'd say 60% of my time is spent on financial modeling/analysis 25% on due diligence and 15% on presentation building/ad hoc research. So far, I have not closed a buy-side deal but am hoping to close at least one prior to making any transition. I did however work through a divestment of one of our portfolio companies.
Typical deal work is as follows:
1) Receive CIM from MD/SVP who has done initial screening
2) Use CIM / Seller's Model / staple financing terms / internal views on market to build DCF and LBO from scratch
3) Draft 1-3 page investment memo with opportunity summary, return metrics with sensitivities, identified risks and ways to mitigate them.
4) Put together Bid letter and send to seller
5) If/when invited to continue deal process, perform financial DD (incld. Reading through current debt docs, any revenue contracts, any service contracts, etc).
6) Coordinate with other technical/legal/tax experts (inhouse/consultants) to build a more informed final financial model prior to a final bid
Other work includes:
1) Building financial model to track portfolio company/asset performance
2) Work with portfolio company/asset managers to draft quarterly and annual fair values for LPs
3) Put together ad hoc research presentations for senior members

The associates that have been hired in the past at my firm were all done through private networking channels. The past analysts had either gone to a competing PE shop, a lower MM PE shop or something completely different. The associates in the past have now become VPs / Directors within strategy & corporate development roles.

Mar 7, 2016 - 2:12pm

Also curious on exit opps out of a 2 year analyst program out of undergrad at a $5bn

Oct 4, 2016 - 4:19am

Bump on this - would love to hear a bit more. When would the recruiting/lateral process start up for these firms? Would they start at the same time as IBD?

Jun 28, 2017 - 4:40pm

Third Year Analyst to PE Associate (Originally Posted: 03/13/2014)

Does staying on for a third year hurt your chances of getting into PE?

I'm a first year analyst and am thinking about staying for a third year and recruiting during my second for a summer 2016 gig.

Jun 28, 2017 - 4:44pm

It depends on the firm and geography as well. From what I've seen in Houston, analysts recruiting during their second years (staying at their banks for third years) significantly outperform analysts that try to leave after two. I'd say this is due to a combination of more deal experience as well as general maturity and industry knowledge. It's also a lot more normal for analysts to stay on for three years in Houston for whatever reason.

I'd imagine that it makes less of an impact in New York where the two and out policy is pretty strictly adhered to and PE funds aren't looking for as much for deal experience and deep industry knowledge. I have no knowledge for how it works in SF or Chicago or anywhere else with significant banking activity that's tied to a specific industry.

Jun 28, 2017 - 4:45pm

Some headhunters and firms see you as "damaged goods" if you recruit as a second year (assumption that you couldn't get an offer the first time around). Your ranking also comes into play since firms will know your bonus. This could be good or bad depending on how you think you are performing. You will have the benefit of experience and deals relative to first year peers, though how that weighs against the first consideration is on you.

Jun 28, 2017 - 4:46pm

Just wanted to follow-up on the "Damaged Goods" subject. If you didn't do any PE recruiting in your first year due to a transaction that you were working on and if this was communicated to the headhunters, should you be alright?

Jun 28, 2017 - 4:47pm

From what I've always heard, staying on for a 3rd year could definitely hurt your chances because many headhunters/firms will assume you didn't get an offer the first time around.

Jun 28, 2017 - 4:48pm

If you're in a top group, have good rapport with the headhunters, and can explain the situation, it's fine. I know people who decided to do 3 years and recruited their second year. I wouldn't recommend it though.

Jun 28, 2017 - 4:49pm

PE analyst to PE Associate (Originally Posted: 10/18/2006)

A year out of school (top 3 ivy), I've been an analyst at a decent sized PE firm $2B under management. I'd stay at my firm but I think I've hit a wall right now because there is currently no prospect of promotion to associate in the near future. The job has been pretty good -- significant responsibility, solid finance/valuation skills, good transaction experience, and no dialing for dollars/cold-calling.

Since I'm not ready for bschool, I'd ideally like to switch firms to make the move to associate. Anyone know how I'd stack up against other IB analysts applying to these same positions (we're talking the 2nd year Goldman/JP Morgans who've done M&A and leveraged finance)? I'm not sure how ppl in my position do since most ppl don't go straight into PE after college.

I know PE associate positions are super competitive.. so if it doesnt work out, I may try moving into banking as a 2nd year..

Jun 28, 2017 - 4:50pm

I'm just wondering, but why don't you feel ready for b-school? With the responsibility and experience you've gained as a PE analyst, I should think that any business school would accept you. Plus, it would definitely simplify the transition to iBanking if you wanted.

Jun 28, 2017 - 4:52pm

One of my gripes is the salary ($50K base, $15-$20K bonus last year). Sure, this is more than enough for an entry-level position, but i did have a chance to make double this in banking positions that i received. After a really terrible summer analyst experience, i chose PE for lifestyle reasons and b/c of the rare opportunity to enter entry-level. At the junior level, I think that my firm definitely leverages its name and the position to pay lower than other finance positions.

Although i know at some firms, analyst/associate level is similar or equivalent, you can't make associate at my firm without an MBA. It's pretty much a partner track position. So as you see, there's often a big gap between me and the next level. I've got just 1 year of work experience under my belt and most associates at my firm have 3-5 years plus business school. I think I would gain much more with another 2 years with either deeper finance industry experience or at a different PE firm that hires associates with just 2-3 years of experience (and where the pay would be much better!).

It is possible for me to apply to Bschool.. but I know that competitive Bschool apps often display the ability to rise in the ranks. After one job with an analyst title, showing that is a bit harder..

Jun 28, 2017 - 4:53pm

I'm in a similar situation: finishing first year as a PE Analyst (smaller shop though), with a somewhat similar comp structure.

However, I'm happy to be here for at least another 1-2 years, but contemplate being faced with the same decision as you at the end of that time. I'm not quite ready to go to B-school, I would like to maybe either go to a different PE shop (ideal) or check out other buyside options(HFs).

I can't offer you any insight, only I would like to know what you decide to do and would be interested in hearing any responses to your situation.

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