Private Equity Operations / Portfolio Career Path

Recently was hit up by a head hunter for a PE Operations (non-buy side role). Coming from MBB this sounds interesting and I like their mix of portfolio companies. However, in looking at the Operating Partners, most of them tend to be ex MBB Partners or C-level execs. This begs the question, where do most of the Associates exit into (considering you won't make Operating Partner without other expierence)

Comments (25)

Apr 29, 2018

Curious about this as well. Also know that these guys get comped well but at my fund get absolutely crushed and have really shitty work/life balance - seems like they get the worst of consulting and private equity combined in terms of lifestyle. Is that the case across the board or is that more so just because I work at a turnaround/distressed fund?

Apr 29, 2018

Typically the program is structured in a way where you can exit to the / a portfolio company in a more active operational role. If successful, you may become an exec at the portco, exit to another portco in a higher role, or get onto an Operating Partner track at a PE (depending on your track record and demand from the PE).

Apr 29, 2018

Any ideas if these roles would be open to hiring out of Corp Dev./Strategy groups or do they typically go MBB exclusively?

Apr 29, 2018

Operations or valuations? Would have to be a decent size fund to spilt duties from the traditional associate role

Apr 29, 2018

I know of KKR Capstone but which other funds have operating roles at the associate level? Is it only the mega funds in NY? What does comp look like?

Best Response
Apr 30, 2018

You are right to be concerned about a career-track operating partner position. For most funds, operating partners essentially act as shadow directors for portfolio companies. They sometimes step into the businesses in a senior executive role, but most of the time, they are senior advisers/consultants to the C-suite and BoD. The guys at KKR Capstone don't really want 'strategy' experience as much as they want operational expertise. I interviewed there years ago with the head of the group, and he really focused on the operational improvements I had made to any companies I had worked with as a consultant. As that wasn't really my background, we parted ways amicably. In their case, they have a structured progression through the ranks to eventually make partner. That's not the case for a lot of other firms.

Vista Equity Partners has a consulting group that works with their portfolio companies, but I believe they also do external client work as well. I think that model is interesting, but I can't think of another firm that utilizes it, so I'm not sure it's worth explaining.

Most firms have no use for junior staff in an operating capacity. You'd be too junior to take a leading position within a portfolio company of any meaningful size. Even if the portfolio companies were small(ish), dropping a 25-year-old into the executive ranks would rankle the staff. The reason for doing so can't be, "This kid is smarter and better pedigreed than you are, so we're going to have him look over your shoulder and report back to us when you fuck up." If you're in your early 30s and worked on half a dozen major projects, with some real bona fides under your belt, you might still be seen as a kid by the C-suite, but they're not going to dismiss you and your advice immediately if you're already proven yourself.

At a fund I know well, the operating partners are all quite senior, but not C-suite talent themselves. They tend to be turnaround experts given the nature of the fund. They split the equity pool between the upper management of the acquired firm and the operating partners at the fund (with the equity pool being between 2% and 12% or so of the overall equity in the firm depending on the size and value of the company).

At some firms, operating partners only participate in the upside of individual deals. At others, they participate in the wider carry pool. It really just depends on the firm, though I think the former arrangement is more common. I sincerely doubt that anyone below the principal level at a place like KKR Capstone receives any carry, though I'd be happy to be proven wrong.

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May 3, 2018

If you want to gain operational experience and are interested in being a leader at a company one day, this would be a great opportunity.

If you're in the right situation, I can easily see someone in this role for 4-5 years and then becoming COO / Head of Strategy / etc. at an exciting start up that awards equity. That's where the real money is made anyway.

Not sure if relevant for you, but Bschools love this kind of experience too.

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May 3, 2018

Yes I've seen it done. I work with a growth equity focused MM PE firm and we are highly involved with our portfolio companies. We run very lean and sometimes the scope of the marketing efforts required are outside the capabilities of our investment team members.

May 3, 2018

Interesting, thanks for bouncing back. When you need bring on outside help, can I ask where you typically look for it? And as a quick follow-up, do you know whether some of the bigger firms staff this capability in-house (some sort of marketing consultant role, i suppose)? thanks again.

May 3, 2018

Yup

May 3, 2018

External advisors are brought in on an ad-hoc basis through various channels. Most of the time, however, would be through a connection within the firm; i.e. knowing the Principal or VP. The senior management where I'm at have insane networks (and I really mean insane) which makes it really easy for us to bring in consultants whenever we need to.

Networking is key here but it's definitely easier said than done. Perhaps reaching out to firms that invest in industries that have the masses as a client-focus (like duff's example) would be most appropriate.

May 3, 2018
thecoldburns:

External advisors are brought in on an ad-hoc basis through various channels. Most of the time, however, would be through a connection within the firm; i.e. knowing the Principal or VP. The senior management where I'm at have insane networks (and I really mean insane) which makes it really easy for us to bring in consultants whenever we need to.

Networking is key here but it's definitely easier said than done. Perhaps reaching out to firms that invest in industries that have the masses as a client-focus (like duff's example) would be most appropriate.

Would it be at all realistic from a cost perspective for a firm to hire on permanent marketing/strategy talent to help as needed across the portfolio (brand building, promotional, social mgmt, etc.)? Could dedicated in-house creative/strategic capability be touted by the firm as a competitive advantage when courting deals? From what i've observed it would be an unusual move, but not, i don't think, all that ridiculous for a firm with a serious commitment to value creation beyond financial engineering. That is, of course, from the outside looking in.

May 3, 2018

Most middle market funds run fairly lean. I am not sure what kind of operations that you are thinking of doing, but on the finance/accounting side there is usually a CFO. There might be another person under the CFO, depends on the firm.

May 3, 2018

What's your background? This seems like a really interesting position...

May 3, 2018

I'd consider it similar to an Alvarez interview, if that helps.

May 3, 2018

Hi Mooseofplenty

How did you go with the interview?

I am actually interested in the management turnaround side of things. Is this something you are too, or just came across?

I'm just starting my research into this space, but are there other companies you came across doing similar work? A bigger one is Capstone KKR.

I'm a management consultant working at one of the bigger firms.

Alex

Feb 16, 2019
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