PE Recruiting Process: BB, Boutiques, and Why They Are Helpful

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Someone recently PMed me to ask how interviewing and referrals at boutiques like Greenhill, Lazard, and Evercore would compare to opportunities from bulge bracket top groups. I think that the heart of this question surrounds the recruiting process and how different firms are judged by PE funds and recruiters alike (which is have seen misrepresented many times on these forums). I wrote the person the following response:

I will admit that I am not an expert with the boutiques because I worked BB. However, I think that correctly understanding headhunters and the recruiting process / incentives will help you answer your question. Based on the process and headhunters incentives, I think you are probably statistically better off at BB but definitely not significantly disadvantaged at a good boutique (which you may be at a MM firm).

The process works like this, headhunters will come through and meet with EVERYONE. Their goal is to put good candidates in front of their clients so their clients hire them, they get paid their fees and they make money. PE firms pay them to be the gatekeepers and put the best candidates in the interviews and ultimately in the jobs. Headhunters decide which resumes the PE firms see at more selective firms, and they give advice on the candidates to fill out the interview spots with PE firms etc. IMPORTANT: Never forget, the headhunters work for the PE firms, not for you. Their goal in helping you is to get the firms to hire you. It's fine to ask them questions and get their advice, but if you ask really dumb questions or give them reason to think you will show bad / embarrass them in front of the clients, they will be much less likely to pass on your resume or suggest you for extra interview spots.

Now, how does this all come together to answer your question about boutiques? Here is how being at a BB bank makes a recruiter think you are a better candidate (in no particular order):

1) You have come from a firm / group which historically places well and has done well at the PE level (presumably with the firms where you may interview). So first off the headhunter / PE firm thinks just based on grooming and statistics you are more likely to succeed. If the PE firm hires a dud from a BB, they are much more likely to say that candidate fooled all of us. They hire a dud from a middle market bank who the headhunter put in front of them, and the PE firm asks why the headhunter put someone from a bad middle market bank in the pile? (sorry to MM people, but it's true, this bias exists and is frequently used as a scapegoat at top firms). Doesn't mean no one from MM can get good jobs or succeed, but from a headhunter's perspective their ass is covered better with a BB candidate, so the bar is a little lower for BB candidates

2) Presumably if you are from a good firm / group you have had a good experience and good deals to talk about. You shine well in the interview if you actually have been on the later stages of a live deal and can talk about it well (although not totally necessary if you really know how you should be talking about deals). Ask anyone in PE who has done interviewing from the other side, you can usually tell when someone is trying to make a pitch sound like a deal. Additionally, from MM firms you can tell when it's a small sell-side where there is minimal valuation work or deep Company diligence. The headhunters will notice this too, and so your interview is a chance to prove to them that you have had a quality experience, before they have to put you in front of any actual PE firms to tell your story. Again, not to say that people from MM firms can't do well and shine here, it's just statistically less likely that they have done deep valuation work on big companies (and MUCH less likely they have done any actual buy-side work / analysis, which can actually be quite different)

3) Senior people at good groups are well connected with senior people at the good PE firms and can put in a good word for you. This can get your foot in the door outside of a headhunter's recommendation / formal process (not very common, but it can happen as a favor, and once you are in the door, does not matter how you got their). Or more likely, at the end of a process firms will get recommendations for their top candidates and then go back to make a final decisions. A recommendation from a former colleague or someone you have a good relationship with will get the edge every time. Not to sound like a broken record, but again this type of relationship is just more likely to exist at a BB firms

At a good group in a boutique bank (such as the Greenhill, Lazard and Evercore of the world), you are likely to still get a significant portion of these 3 benefits, especially in a good group that does deals. They may not be seen as a a Goldman Sachs, Morgan Stanley or JPMorgan, but they are viewed in that league, unlike a MM bank which is usually viewed beneath the BB's and strong boutiques (I'll caveat here that the boutiques you mention are actually good banks, but that is not the case for all banks that call themselves "boutiques", so be careful on this). So for that reason, you should be starting recruiting on relatively even footing from a top boutique relative to a BB.

Additionally as a side note, you should use your Q&A in IBanking interviews to ask "where have previous people placed?", "What were some good deals that have come out of this office?" etc, it will give you an idea of how helpful this specific group will be in getting you placed for PE vs. how much better you will have to shine on your own to get the same job.

Hope you found this helpful, please feel free to share any additional comments or disagreements with my assessment.

Comments (14)

 
Oct 16, 2013 - 7:51pm

People seem pretty hard-up on Lazard, but I haven't seen them place all that well... could just be me. I've seen Moelis, Evercore and Centerbridge do extremely well though.

If you're shooting for some of the most competitive PE gigs out there, I'd actually argue that you're better off at one of the three boutiques mentioned above.

Take into consideration the total population of banking analysts at each of the BB and the total population of analysts at the elite boutiques. Look at that ratio and then look at what the distribution is at the most competitive PE shops. Elite boutiques are disproportionately represented. If banking analysts placed into PE at a similar ratio... there should be like 1 or 2 elite boutique kids per 12-18 BB kids... that's not the case. Its kind of like the proportion of black males in the prison system (I'm not trying to be funny). 12% of Americans are black yet 40% of inmates are black.

Just like there are legitimate reasons for the skewness of black inmate proportions there are legitimate reasons for elite boutique elite PE population skewness.

IMO the main three reasons are...
(1) if you're at an elite boutique you're in an M&A/industry execution role; if you're at a BB you may be in any of the 10-15 groups in banking, 8-10 of which may be relevant for PE recruiting
(2) all BB are not created equal and many of them just aren't viewed with the same esteem as the Evercores of the world. While Citi, UBS and DB may have placed well historically, that's not really the case anymore
(3) and this one will probably be controversial... on average the elite boutique seats are more competitive than your average BB seat (across BB firms, across groups)... they pay more, they're considered more prestigious and therefore there may be some selection bias in better candidates going to the elite boutiques

Array
 
Oct 17, 2013 - 12:32pm

Marcus_Halberstram:

People seem pretty hard-up on Lazard, but I haven't seen them place all that well... could just be me. I've seen Moelis, Evercore and Centerbridge do extremely well though.

Agree for the most part. Assuming you meant Centerview, in which case I would disagree with their historic top placement to PE/HF world (and honestly the sample size is not nearly large enough to evaluate them fairly). The Moelis top placement is a sinking ship, particularly as they overexpand their analyst class and fail to bring in the dealflow to match their firm growth.

 
Oct 17, 2013 - 1:28pm

Black Jack:

Marcus_Halberstram:

People seem pretty hard-up on Lazard, but I haven't seen them place all that well... could just be me. I've seen Moelis, Evercore and Centerbridge do extremely well though.

Agree for the most part. Assuming you meant Centerview, in which case I would disagree with their historic top placement to PE/HF world (and honestly the sample size is not nearly large enough to evaluate them fairly). The Moelis top placement is a sinking ship, particularly as they overexpand their analyst class and fail to bring in the dealflow to match their firm growth.

You must have information the rest of us aren't privy to, because they certainly don't appear to be struggling on the deal-flow front.

http://www.moelis.com/investment-banking/SitePages/select-transactions.aspx

 
Jun 19, 2014 - 8:50pm

Getting into top 20 PE shop from Boutique vs. BB (Originally Posted: 10/12/2006)

Exit opps at Evercore/Greenhill.

What is the general opinion of these boutiques? Are PE exit options at these banks worse than a top group at a 2nd tier BB? Will working at a boutique push you under the radar when the PE/HF headhunters come?

Any and all opinions welcome.

 
Jun 19, 2014 - 8:52pm
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