Pre-MBA PE really > Pre-MBA IB?

I was recently told by an MBA admission consultant that applicants with 2+2 backgrounds are viewed more favorably than A2A's by MBA adcoms. When pressed to explain this, her answer was.....

"Everyone wants to do private equity so adcoms view applicants with private equity experience favorably because they've already done it."

Is her perspective correct? If so, why?

It does not surprise me that PE professionals make up a larger percentage of the class at H & W (for example) than Bankers do (H (PE/VC: 16%, Financial Services: 11%), W (PE/VC: 12%, IB: 9%)). If you've been promoted in banking you do not need to get an MBA to progress, you go back because you see value in the experience. However, most PE shops have strict 2 year programs and jettison their Associates after those years are up. Most of those Associates NEED business school in the hopes of land a Post-MBA Senior Associate/VP role. As such, the pool of PE/VC applicants should be larger than the pool of Banking applicants.

The only explanation I could fathom is that adcoms view 2+2 candidates as the "cream of the crop" whereas A2A's couldn't land PE jobs and as such are less desirable candidates. My problem with this is that there have been so many PE shops that have popped up over the last 10 years that IB Analyst classes have been thoroughly raided. At this point, the number of A2A's is probably a minority of the total class while PE has taken a very healthy chuck if not a majority. You cannot possibly be getting the "cream of the crop" if you are taking a majority (or even a very healthy piece) of the analyst class.

As a practical matter PE Associate work and IB Associate work is not vastly different so, given all of the above, is pre-MBA PE really > pre-MBA IB?

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Comments (18)

Aug 26, 2019 - 8:49pm

Is it necessarily true that the best analysts go to PE? Do you really think banks would promote people whom are below the median?

Some candidates like the security associated with a career track in banking as opposed to going somewhere you're kicked out after 2 years. Some people see PE as too crowded and very difficult to move up the ranks whereas banking is more structured and a pathway to promotion more assured.

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Aug 26, 2019 - 11:14pm

You look at any job board lately? Banks are THIRSTY for associates and it's for a reason. Why do you think they keep shortening the timeline for A2A, upping the pay up, adding all sorts of perks? Because none of those good analysts actually want to stay. Very few 24 year olds want long-term stability out of their first couple stops. This isn't 1950.

Aug 27, 2019 - 8:34am

Please elaborate. I have been in banking for 5.5+ years and have worked fairly closely with associates at a few different PE firms and i've never gotten the impression that they're doing anything vastly different that we are. They're not observing board meetings. They're not negotiating meaningful terms (working capital adjustments aside which on small deals might be meaningful so senior guys choose to handle it anyway). They're not coordinating lenders, lawyers, accountants, etc.

They're modeling, putting together IC presentations, helping on diligence grunt work and occasionally processing FP&A requests from the CFO's of the portfolio companies.

I'm obviously generalizing based on my experience and from what I've read on this site but any PE associate who thinks he's actually an "investor" is fooling himself....

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Aug 29, 2019 - 11:20am

This is just not correct. I observe board meetings, have been involved with negotiations on debt agreements, strategic initiatives, add-ons, etc.; coordinate lenders, lawyers, accountants, bankers, consultants, etc. on every potential deal.

We're not the investor, sure, but we are doing the work that you don't see when you work with the associate during a sell-side process.

Aug 27, 2019 - 8:32am

Avoid the sweeping generalizations. I've seen a few platforms where those retained from A2A are top performers and have ingratiated themselves with group heads. As mentioned above, banks aren't promoting mediocre analysts.

These promotes have unrivaled amounts of goodwill with their groups, associate pay, VP offices/roles, business development opportunities and much more flexible hours.

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Aug 27, 2019 - 1:39pm

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