PE isn’t the best way to get into b-school

Have some associates in my cohort wrapping up their app cycles and wanted to address this, especially with regards to H/S (where our firm has had decent success historically). A lot of bankers think once they land a PE gig with a ton of alumni from those schools, the next five years of their lives are set. For various reasons, among the overrepresented industries, even if you're at an MF, PE doesn't stand out at the top per-capita compared to consulting or even tech products. There's a decent argument you'd even rather be a standout in one of the leadership management programs at a reputed F500 than be "just another" MM / MF associate if the goal is purely MBA admissions. I'd still recommend taking the PE job for general optionality, signaling, technical experience better post-MBA options, better non-MBA options, etc. but let's get some things straight.

  1. H/S classes stay real steady at 950 / 400 ish every year. The % of this cohort that comes from PE / VC / general buy-side also stays relatively constant in the 16-18% range. However, in a booming economy like we had pre-covid and like we're starting to enter now, bigger and bigger funds to accommodate more and more deal-flow naturally means bigger and bigger class sizes. That means more applicants industry-wide for the same number of seats every year. PE also tends to be one of those industries that's not as susceptible to cyclicality i.e. the kids who were going to apply will likely still apply instead of foregoing and recruiting for a lateral in a boom cycle, partly because they can always afford the "vacation" (and want it) and just recruit afterward.

  2. Schools are really focusing on diversity these days, and the PE pool tends to be white / ORM / male. To the extent that even the number of seats stays the same, this is a headwind for most "typical" PE applicants, again, fighting for fewer slots.

  3. The PE thesis for going to b-school is...fine. Like yeah, you did some models, interacted with management a little bit, realized there's so much more about the business beyond finance you want to learn before you step back into the field and actually sit on Boards as a VP, work collaboratively with management, hold their hands month-to-month, blah blah blah. Not a terrible play. The issue is most cultures at PE shops, especially big bad buyout companies, are not one of the associates doing jack shit operationally. Yeah, you can lie and say you had some great product mix idea that you said in the corner of a management meeting to the CFO that ended up being the catalyst for more growth but...come on, no. At best your Partner or operating team suggested that, and you're out here modeling. Even internally, you can talk all you want about how many weighty thoughts consumed you while making IC decks (hell, you may have even spoken once), but the issue there is that most shops that actually give you discretion on go/no-go decisions or actual strategic and structuring matters are the type of places that are grooming you to be a direct promote. The overall oomph for why you need an MBA just isn't there compared to the more "real" operational problems consulting and tech people face (though trust me, I don't think they're doing big-brain management stuff either). Your handling the legal or consulting "workstream" (sending out calendar invites and dial-ins) doesn't stack up. Your analogs at those other industries also get nominal promotes in their 3rd year while you're a 1st-year associate, which means they often get to, you know, actually manage people by the time they're applying to a management program.

  4. The "soft stuff" at most PE firms is ass. I'll just compare with consulting to illustrate. MBB gives out superlative awards (including "quick" promotes) like candy, whereas being a good PE associate means you might get a nice rec letter and deal-flow. When it comes to nonprofit work, MBB definitely has a more centralized system of getting junior folks involved (including with work projects), whereas big bad PE firms tend to be a lot more decentralized (rich guys contributing to good causes with their own money on their own time). Again, your like helping plant a garden at a community center once at a firm event doesn't compare to the consultant who can take on real work with a struggling local opera house or even the government for some noble cause. The same thing when it comes to firm-building / diversity; the bigger consultancies and tech firms have myriad affinity groups and diversity initiatives that juniors can serve on and help out with, whereas the nature of on-cycle recruiting is that PE associates are "lucky" to even be one of 12 interviews a banker is going through to get hired. Good luck building a tangible record with that little exposure.

  5. ECs / post-work. My sense is most PE VPs want to do a good job writing letters for their associates so they can get into their alma maters, but they seem to be kind of passive about the overall application process. Consultancies, on the other hand, seem to love their feeder status and will hook up their juniors with nonprofit (usually BS fundraising roles, but sometimes better stuff) roles and connections outside of work. Also, the secondment model means consultants can spend a year actually doing operational work while PE associates claim they have "insight" into it while modeling, and usually, MBB will support a move to the next job (really common to see government, social capital, startup, nonprofit work, even going home and starting your failed startup) for a year or two pre-app that's just plain more interesting than the average 2+2 IB to PE guy. My feeling is the schools are looking for more interesting profiles and vulnerability or whatever in the overrepresented camps, and having that "alternative" experience really helps build out the story in a way big bad PE really doesn't.

A caveat to all the above: the pipeline is still going to be fine in toto, the industry is going to send a ton of people to school every year, and honestly at most non-H/S/W schools, just going to a good bank and good shop with good stats is going to be fine. I'm just trying to calibrate expectations as to why, especially for non-diverse applicants, coming from "the path" is no gimme for HBS or GSB admissions like it's sometimes portrayed to be, or you might think it is when every mid-level to a senior person at your firm seems to be an alum.

Comments (59)

 
  • Prospect in IB-M&A
Feb 19, 2021 - 2:28am

Makes sense that PE isn't the best way to optimize yourself for b school. Working in IB and PE leaves little time to differentiate oneself and in most cases the highest pedigreed people end up getting the nod for H/S/W in the PE cohort. Although it seems like most going down the IB->PE path will be competitive for the rest of the M7, which still open a lot of doors. 

 
  • Analyst 2 in IB - Gen
Feb 19, 2021 - 4:24am

I agree with this post somewhat, but I've never understood why some people set getting into one of the top 3 mba programs as their ultimate goal in life. Do these programs, along with the rest of the m7, offer distinct pedigree and competitive advantages? Of course. But if you're already experiencing success in ib/pe, particularly with a team you enjoy, I always question why one would trade this. Let's face it, you need to go to college nowadays so I understand the emphasis on going to a target school, since you're essentially taking the "better" path of a required route (I.e obtaining an undergrad degree), but the opportunity cost of an mba is so substantially higher, especially for those in financial services who intend to stay in the industry.

Before anyone comments, I'm aware that some firms require mbas, but I'm mainly referring to a few friends I knew from college who planned their lives around getting into these programs despite having jobs they very much enjoyed (relatively speaking, this is ib/pe; after all) only to come out with less $$$ and opportunity more or less equal to what they had prior to enrolling.

 
  • Associate 2 in PE - LBOs
Feb 19, 2021 - 11:02am

OP. This is accurate, and the credential is losing must-have status given a more robust direct promote and lateral-then-promote market these days. That being said, I think there's two factors: 1. after grinding for four years, I really think a lot of PE associates want a vacation without losing career trajectory, and an MBA offers exactly that; 2. spending time with only other overworked finance types as friends can make people jaded, and sometimes you just want to talk to someone *happier* from marketing or product who actually had a life and may just be happier. also good networking in case you want to switch to industry. I think those considerations are underrated relative to just getting the achievement on the LinkedIn.

 
Controversial
Feb 19, 2021 - 7:46am

Be black and rich, you mean. But if you're black, chances are you're poor, which means chances are you're not getting into a top b school.

 

Edit: Bring it on with the MS. I can guarantee that the average MBA candidate, at least within the T15-20 and definitely within the M7, came from a significantly wealthier household than the average American. Because, duh, coming from a rich family gets you places in life. And African-American households have statistically low incomes.

 
  • Analyst 1 in IB - Gen
Feb 19, 2021 - 3:32pm

Why is this getting MS? He's being crass but its true that being black gives you a massive leg up with B-school admissions and job applications

 
Feb 20, 2021 - 7:53am

Because you only have a "net" leg up in admissions if you're one of the relatively fewer black people who grew up rich. The number one way to get into a good b school or good job is to be born rich, and then you can start to get into whether it's "better" to be black or white or brown or whatever.

 

Let me ask you this: If you could choose to be born in America, and could choose to be born white or black, which would you pick? And let me clarify that you will know nothing from your current life, and that you have a completely random chance to be born into any white or black family.

 
  • Associate 2 in PE - LBOs
Feb 19, 2021 - 9:18am

You're vastly overestimating the support MBB gives and tangible operational support you get as a junior. There's just a boat load more MBB people applying (more appealing and more time to apply vs. someone who does well in PE) so yeah no wonder you get seemingly more well-rounded candidates.  

 
Feb 19, 2021 - 11:30am

If you are smart enough to land a job at a MF, I guarantee that you will have an easier time getting into B-School by being a top performer at a large F500 such as Visa, NVIDIA, PepsiCo, PayPal. 

My brother and I have friends who landed roles at these firms out of ug in: Product, Partnerships/BD, Marketing. All of them are now at H/S/W/M. Came from semi-targets. Not saying these people are smart enough to be at KKR, but I am saying that they made it to top schools while working at 'vanilla' F500 firms. 

 
Feb 19, 2021 - 1:05pm

Atleast in Partnerships/BD and Product roles this is almost always the case. Many people at F500's have experiences transitioning into a variety of roles which can also be beneficial especially at an early stage in one's career. 

 
  • Prospect in IB-M&A
Feb 19, 2021 - 12:20pm

I generally agree with this but also the growth in class sizes at consulting firms shouldn't be discounted. Generally these firms have been growing/hiring more than say, a decade ago, so the white/asian male straight from consulting is also going to have a harder time. Honestly, the best differentiation I have seen is something like consulting->industry -> B school or IB->industry/IB->PE->industry to B school.

 
  • Associate 2 in PE - LBOs
Feb 19, 2021 - 3:54pm

Agreed with this. Honestly "the path" for IB/PE folks should be updated to take 5 years instead of 4 and try to work at a client for the last year (like a build-your-own-secondment). I'd honestly appreciate more of those profiles as classmates than vanilla MS -> BX types

 
  • Analyst 1 in CorpDev
Feb 19, 2021 - 5:37pm

Agree 100%. Unfortunately, people who go MS -> MF feel entitled to HSW which somewhat makes sense but is also laughable at the same time.  

Plenty of people doing IB at MS who are far less exceptional in almost every way compared to the avg person I know at CVP, PJT. 

 
Feb 19, 2021 - 7:07pm

Eh, that was a lot of words to not really say anything, much of which isn't even really accurate. One point out of the gate - in a booming economy all sectors flex up yet admission hold constant, PE would be effected no different. Also in a booming economy less people go to bschool because they can get direct promotes so there are puts and takes.

In regards to consulting/tech - something that I never understood until going to bschool, is there is some what of a wink-wink with firms and schools in terms of admissions and hiring. Ultimately schools want candidates placed into jobs. That is their number one concern. So if you hire in droves, like the consulting firms (and more recently tech), the payback is admitting their applicants into school. Also, along those lines, its why its at least in part probably easier to get in if you're sponsored because its one less person to worry about getting a job. The same goes for good PE/VC firms with active alumni that recruit on campus. Its a you let our kids in...we'll recruit you on the back end. 

Really though, posts like this are silly because there is no magic formula. Certainly going to a PE fund, a top on even better, will not hurt your chances of getting into school even on a relative basis. People should do what interests them most and let the cards fall. This constant trying to optimize your life for things you have no control over isn't an intelligent way to approach career planning, nor life. If you do what you enjoy most you'll be the most successful. Full stop. 

 
  • Associate 2 in PE - LBOs
Feb 20, 2021 - 6:32pm

ke18sb

Eh, that was a lot of words to not really say anything, much of which isn't even really accurate. One point out of the gate - in a booming economy all sectors flex up yet admission hold constant, PE would be effected no different. Also in a booming economy less people go to bschool because they can get direct promotes so there are puts and takes.

In regards to consulting/tech - something that I never understood until going to bschool, is there is some what of a wink-wink with firms and schools in terms of admissions and hiring. Ultimately schools want candidates placed into jobs. That is their number one concern. So if you hire in droves, like the consulting firms (and more recently tech), the payback is admitting their applicants into school. Also, along those lines, its why its at least in part probably easier to get in if you're sponsored because its one less person to worry about getting a job. The same goes for good PE/VC firms with active alumni that recruit on campus. Its a you let our kids in...we'll recruit you on the back end. 

Really though, posts like this are silly because there is no magic formula. Certainly going to a PE fund, a top on even better, will not hurt your chances of getting into school even on a relative basis. People should do what interests them most and let the cards fall. This constant trying to optimize your life for things you have no control over isn't an intelligent way to approach career planning, nor life. If you do what you enjoy most you'll be the most successful. Full stop. 

I think OP is correct (and you're not) that B-school application is actually counter cyclical; they're just arguing that there's less drop-off in PE applicants in good times relative to other industries, which I buy. Also PE class size expansion can be from like a class of 6 to a class of 9 or 10 in a boom year, but I doubt you see, say, GE or P&G expand their leadership or product groups by 33% like that.

Your more general points about consultants have a feed-in / feed-out model are right, but that strengthens OP's point, not weakens it. The PE thesis isn't nearly as strong on the feed-out. They barely ever hire non-PE experienced people out of school, and even then, the pyramidal hierarchy means many more numbers in than out (especially among similar fund sizes).

I agree with you on not chasing school, but your problem seems to be more about OP's premise (IF b-school is a goal, PE isn't optimal) than his argument, and they caveat many times that b-school maybe shouldn't be the goal and that a PE job can be great and recommended even without MBA optimization.

 
Feb 20, 2021 - 4:35am

MBA is a joke:

1. Real value from classes is extremely low. People are just reading cases and talking for the sake of talking. You can practice speaking at work on calls/meetings and be better off, cause at work what you're saying actually matters, and these case discussions are pointless, people are just talking to earn participation points.

2. Value from networking for somebody who comes from banking/PE is questionable. You'll be the most successful in the class. A bunch of people there will be diversity hires who wouldn't get there if they were not black/latino/female. And even non-diversity people will be from shitty strategy jobs from F500 and even lower, and from failed start-ups. You can get these jobs without much effort from non-target schools, and people who spent 3-5 years on these jobs have little to share compared to people from banking/PE/consulting. It's no surprise that these people go to do MBA so they can get a shot at banking/PE/VC/consulting. But why would you go there from banking/PE? You would think why the heck do the top schools take these people? The schools believe that this way they achieve diverse and collaborative environment. Like, if they get people from all different industries and from all sorts of companies, you can all learn from each other. I'm personally quite skeptical of this view. I'd say the class would be much stronger if everybody was from BB IBD and PE MF, but Harvard will admit a black lady from Verizon instead and some dudes from Exxon and BP.

You can networking with more interesting people by just reaching out to them on LinkedIn and grabbing coffee. There will be a great response rate for somebody from banking/PE. And you can do it for free - or you can pay $200k for a worse version of the same called MBA.

3. Value from recruiting is questionable. If you've done banking and PE (or just banking), you can recruit for any job you want. If you want to switch to the industry and do finance/strategy at F500 or a smaller company, you can do it. You wanna switch your bank or fund, you can do it. You wanna move to VC / AM / Consulting, you can do anything you want. Headhunters will help you move if you need help. They'll be eager to help you for free - or you can pay $200k to recruit in the same stream with people from Verizon and Exxon/BP.

 
  • Analyst 1 in CorpDev
Feb 20, 2021 - 9:44am

Sounds like somebody got a below average GMAT and is now trying to vent rofl

 
Feb 20, 2021 - 2:56pm

Bschool isn't a joke its just not for everyone. Some of your points are pretty off in my view...but at the same time there are very valid reasons to not go. For many people there are tons of reasons to go. For someone that is laser focused on their career and has a fairly blue chip background and knows how they want to progress in their career and has come from top banks/consulting/buyside roles then yes it likely does not make sense at all. But that does not mean that it doesn't make sense for everyone. For those that have specific goals that will be met by going to school they should go...but people shouldn't go just bc that is what they think is expected. 

 
  • VP in PE - LBOs
Feb 21, 2021 - 12:30am

There are still plenty of reasons for some people to do an MBA - the most obvious is the pivot into banking or consulting, which takes place at all schools apart from HBS / GSB.  Surprisingly even both of those programs have a fairly large number who choose to move into MBB consulting roles.  At Wharton / Booth / Columbia you're still looking at ~100 in each class going into banking, with another ~150-200 going into consulting. 

 

On the PE side, sure, some firms have allowed direct promotions, but a good number of the larger firms still require an MBA to move to the VP role.  At HBS/GSB specifically you see a lot of former PE associates moving into earlier stage growth / VC -- in my view this is a difficult move without an MBA, and the MBA programs give access to a lot of VC scout, campus fund, fellow etc programs to get candidates deeply engrained in that ecosystem. 

 

Things have certainly become more competitive for PE candidates, and the result is that Wharton is even more over-saturated with 2+2 banker / PE candidates than it was earlier, as UMM fund placement at GSB/HBS slowly falls each year.  Diversity is certainly a big factor, as was mentioned earlier on, PE associates are overwhelmingly white males -- I don't really have any qualms about this, and while there are certainly better ways of evaluating diverse candidates and factoring in income levels, it is what it is.  The MBA programs also seek to create "diverse classes" which is more frustrating to me.  I think we can all agree that FP&A at a F500 is less competitive of a role coming out of undergrad compared with a decent banking role, but there are cases where with all else being equal, the former would be a preferred candidate because the school is over-weight bankers.  

 

To the original point, PE is still a competitive industry.  If you don't get into HBS/GSB go to another of the M7  95% of the recruiting opportunities are going to be the same anyways -- with the exception being basically tiger cub HFs and the top west coast VC / early stage funds which pretty much just recruit from GSB. 

 
Feb 21, 2021 - 7:44pm

Glad you brought up former buyouts associates getting an MBA and then pivoting to growth/VC, have seen a few people do that. Presumably they'd be taking a pay cut though if they joined a VC as a senior associate, or even a VP? Does that make the cost/benefit analysis of business school even tougher?

Guess it could be worth it to them if that's what they're passionate about.

 
Feb 23, 2021 - 11:56am

One of my friends just did this out of GSB. As a senior associate at a UMM buy-out firm, he was making 2x+ the cash comp of the VP roles he secured offers for in VC. We didn't discuss the expected value of carry and I'm not sure of the quality of the VC firms he interviewed at, but he ended up returning to BO PE as a VP last year.  

 

With that context above, I'm not sure carry in VC can often make up the difference in compensation. Not sure if it can make it up on average either, but happy to be proven wrong as I only have 1 data point. 

Array

  • 1
 
Feb 21, 2021 - 2:53pm

This is a bizarre post yet is all too common on this forum... The average undergraduate GPA at HBS is 3.7 and the average combined GRE is 326 - with an overall acceptance rate of 12%... 

These stats should be peanuts for the kids who went to target schools and managed to land at bulge bracket and MF PE roles. 

Whether or not someone is accepted into HBS after having accomplished the above is more a matter of chance than much else. 

 
  • Intern in IB - Ind
Feb 22, 2021 - 1:13pm

it makes sense--the stats are relatively low and the acceptance rate is also low. This means that a lot more people have those stats than there are spots at the schools meaning that u just need to get somewhat lucky if you're above the threshold

 
  • Analyst 2 in IB-M&A
Feb 24, 2021 - 12:30pm

You do realize that the Banking and PE candidates are pitted against each other right? The lower mean/medians stats are caused by career pivoters and those with STEM backgrounds, etc.

 
Feb 22, 2021 - 9:33pm

I had actually intended to mean that the stats are low and the acceptance rate is high (relative to undergrad stats and acceptance rates). So if someone had already managed to pull off getting into target undergard (around ~6% acceptance rate and 2200+ SATs) and managed to land bulge bracket IB/PE roles (usually won't happen unles GPA is 3.6+), then business shool admissions are a pretty low bar...  

 
Feb 24, 2021 - 1:10am

The reason why it's still difficult is because raw stats can only take you so far. For example, the SAT/GMAT aren't particularly hard tests if you're semi-intelligent and motivated. If Harvard wanted to, it could fill its class three times over with just valedictorians and 1600 scorers, but that's pretty boring, so after hitting a certain score benchmark, the test score matters less and less and personal factors like diversity, essays, extracurriculars matter more.

These personal factors are the things that people have the least control over. Quantitative stats are just to show admissions officers you can handle the workload and won't drop out. After that, you have to differentiate yourself in some way through personal qualities, which most people struggle with since they're just average smart people interested in business/finance.

 
Feb 25, 2021 - 12:54pm

Not sure where you get this line from or if you have data to back it up: "If Harvard wanted to, it could fill its class three times over with just valedictorians and 1600 scorers."

I am fairly confident that the business school cannot and hence why its stats are notably below those of Harvard College.

 
  • Business School in PE - LBOs
Feb 23, 2021 - 3:33pm

As someone who did consulting and then PE and can see how my peers from both cohorts did in admissions, I can say the latter gives you a huge leg up. The PE pool might be getting bigger every year but consulting is growing even faster and is a much larger pool of people to begin with.

Going into PE is certainly no guarantee of getting into H/S, but you should at least have a decent shot at both and a really good shot at Wharton if those don't work out. For consultants, you have to really stand out even if you're at MBB to get into H/S/W -> there are just so many consultants applying each year.

 

Some numbers -> Of the ~40ish people I started with at my MBB office, 20 went to business school. Of those 20, 6 went to H/S/W and 14 went to other business schools (some may have gotten into H/S/W and declined but I know most didn't). Of the 6, 3 of us also went to PE.

At the PE firm I worked, literally everybody who applied to business school got into H/S/W. Granted that's a smaller sample size, and it's not 100% across the industry, but I bet it's at least 80% that get into H/S/W from well-known funds.

 
  • Associate 2 in PE - LBOs
Feb 23, 2021 - 11:46pm

I don't doubt this is true, but a) OP focused on H/S for a reason, and b) I don't think anyone doubts that UMM / MF PE is probably more competitive to land than a general starting slot in MBB. There's a reason many people try to go to MBB -> PE in the first place.

What's interesting to me is whether a similarly qualified candidate in MBB would have as good a chance getting into H/S from, say, McKinsey after 4-5 years compared to McKinsey -> Golden Gate, and my hunch is yes, for the reasons laid out. If you're a top performer at M, the system is made to swallow up you and your peers to H/S en masse, whereas I think the applicant is so overweight PE that making the switch isn't worth it IF the only goal is b-school (which for many reasons covered in both OP and the comment thread, it probably shouldn't be). 

 
  • Business School in PE - LBOs
Feb 24, 2021 - 12:12pm
Start Discussion

Popular Content See all

You Did it Citi
+58OFFby 2nd Year Analyst in Investment Banking - Industry/Coverage">Analyst 2 in IB - Ind
Why would any associate+ banker choose a BB over EB?
+40IBby Intern in Investment Banking - Mergers and Acquisitions">Intern in IB-M&A
Share a day that looked like a Suits/Billions episode
+31IBby Intern in Investment Banking - Generalist">Intern in IB - Gen
Evercore Target Schools?
+22BSCHby Prospective Monkey in Investment Banking - Mergers and Acquisitions">Prospect in IB-M&A
What's Wrong with Warburg Industrial & Business Services?
+17PEby 1st Year Analyst in Investment Banking - Mergers and Acquisitions">Analyst 1 in IB-M&A
Rich GF/Future Wife - Becoming a sugar baby
+14OFFby 3rd+ Year Associate in Real Estate - Other">Associate 3 in RE - Other
William Blair - WFH Experience
+13IBby 1st Year Analyst in Investment Banking - Industry/Coverage">Analyst 1 in IB - Ind

Total Avg Compensation

February 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (31) $349
  • Associates (161) $231
  • 2nd Year Analyst (97) $151
  • Intern/Summer Associate (92) $144
  • 3rd+ Year Analyst (23) $145
  • 1st Year Analyst (370) $131
  • Intern/Summer Analyst (304) $82

Leaderboard See all

1
LonLonMilk's picture
LonLonMilk
98.5
2
Jamoldo's picture
Jamoldo
98.4
3
Secyh62's picture
Secyh62
98.3
4
CompBanker's picture
CompBanker
97.9
5
redever's picture
redever
97.8
6
frgna's picture
frgna
97.6
7
Addinator's picture
Addinator
97.6
8
Edifice's picture
Edifice
97.5
9
NuckFuts's picture
NuckFuts
97.5
10
bolo up's picture
bolo up
97.5