Am a sell-side lifer. Never really contemplated PE but a really interesting opportunity has come up at the principal level.
My sense is that while there is a lot of overlap, I assume running a sell-side is pretty different from putting capital to work, e.g., managing vs. directing diligence, legals etc.
I'm assuming there is little room for a "learning period" or ramp up compared to what an analyst/associate would get. What should I prepare for?
Is the structure for the fund’s deal team going to have anyone below you other than an associate? If so, it’ll be a tough learning curve if you’re expected to manage all the stake holders from day 1. If there is a VP / senior associate as well, you can probably work with them and get up to speed on how to do it over the first 6-12 months
Thanks for this. It does sound like it will be a full stack, at minimum a senior associate on every deal but the expectation for me is origination + full on execution. Sounds like I'd be in for quite a ride.
Frankly I'd just clear your schedule for the next 12+ months if you decide to take the plunge. Kiss your wife and kids goodbye and treat it like a deployment. I simply could not imagine someone coming into my fund right now at the principal level without getting absolutely rocked.
I don't know the nuances of managing legals and diligence from the buy side, just directing from the sell side.
Honestly was surprised when I was approached. My deal experience is not the kind that would directly slot into a principal level on the buyside. I do have a good pipeline and track record in that sector, so not concerned about the origination part.
I did meet them and the feedback was good. Who knows, am not sure I would jump into it if I wasn't confident I could succeed.
Something less discussed on this site, but you should be fully prepared for a lot of docs work (assuming you win a bid/offer). I think it really could be up to you on how detailed you want to get into the transaction documents, but if you want to give your best effort, I would, at the bare minimum, review every redline of every turn of every document when executing a deal. Every firm is different, so how engaged your in-house counsel is really depends on your firm. But, there will also be commercial points that you will have to make the call, or negotiate, even if you have a sophisticated in-house counsel. Even the best lawyers from the best law firms will never have the full picture or complete context of what you want or need. Always de-risk. Never fully rely on lawyers (both internal and external counsel), and be detailed on paperwork. People on this site like to talk about financial modeling all the time, because most of them are juniors. Of course, that is important, but you will come to realize that the "docs work" is really the deal itself, and you need to be absolutely detail-oriented. Wording of any given sentence matters. I personally am always paranoid and think about a deal from "what if it fails" perspective, whether buying or selling an asset. De-risk as much as possible. Shareholders agreement negotiations is a whole different topic, partly experience-driven and partly common-sense. I would say it comes natural for the best dealmakers. Learning the "art of give and take" will be a big part of your process of learning how to negotiate (ie. understanding what are absolute "must-haves", and also having an intuitive sense of when you have leverage and can dictate, and when you don't, as well as understanding which points your counterparty would never yield on).
If you have a competent senior associate (or any junior), he/she can run the diligence (at least administratively). You would still want to monitor and give feedback to your senior associate at every turn/stage of diligence. I'm going to say some zen shit, "trust, but don't trust". You need to learn to delegate, but just realize that if you are lead on the deal...you have all the responsibility. No one will forgive you, and blame the junior on an underwriting/transaction mistake. You need to check everything.
If you are passionate about dealmaking, the above should come naturally to you, as you would hold yourself to the highest standards, and make sure you execute to the best of your abilities.It comes down to accountability.
Never allow any deal you touch to fuck up. You must give it your full attention. No excuse is tolerable (even if your wife or you just gave birth). It's a tough industry. Own the process.
The "what if it fails" is a good framework. The other thing I try think about is instances where incentives could be misaligned - particularly on equity docs when it comes to things like ratchets.
I passed on this opportunity and stayed the course. Just wanted to say everything you said here rings true and more now that I have a more senior role. This nugget of wisdom should honestly be a post on its own, especially the parts about docs, derisking and the give & take piece.
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