Have made two posts on WSO that were well received (PE Recruiting Walkthrough and Q&A session), so figured I'd give back and host another Q&A for the community. If you haven't read through my old posts, I implore you to quickly skim through to avoid re-asking the same questions.
As a reminder: Joined a mid-size MBB office in 2017. Signed an UMM/MF PE offer during on-cycle in 2018 (~1 year into job), and will be join my PE fund after finishing up my MBB stint in July.
Ask away!
Thanks for posting !
1) Why did you decide to switch to PE after 1 year at MBB ?
2) How is the difference in comp ?
3) What was important in your interviews for PE ? (doing a lot of due diligence at MBB ? internships in finance you had done before ?)
1) I was always interested in finance/investing, so PE was a natural transition post MBB. I thought about recruiting during my first year, but wanting to give consulting a fair chance and also wanted more time to prep / see which firms would be a good fit for me. I ultimately decided to recruit for PE because I thought I'd learn more as a PE associate vs most-MBA role at MBB, and that i'd be genuinely more interested in the job. Time will tell, but I'm eager to get started in PE and think my learning will continue to accelerate in this new role.
2) Fair question. This depends a lot on type/location of PE fund so I'll break it down (this applies to ~90% of firms but there are exceptions of course): - MBB: ~$200K all-in is a fair assessment for a first year post-MBA role (which is what i'd be if I stayed) - Tier 1 city UMM/MF: ~$275-$350K all-in - Tier 1 city LLM/MM: ~$225-$275K all-in
On a per-hour basis, the difference isn't massive to be honest. In terms of absolute dollars, then it's fairly sizable for people in their mid-20s.
3) I'll break this down into two parts: - Getting the interview: The people who were able to get multiple PE interviews normally came from a good school, had a good GPA, were strong performers in their class, and then were able to convey to the HH why they wanted PE. Think of a HH chat as a first round interview. They only pass on the top-ranked candidates to the PE firm, so you need to impress them and also make sure they know that you'd sign the offer on the spot. You don't necessary need DD work at MBB or have done a finance internship, but you need a good reason as to why you're interested in PE. You can also get interviews if you don't come from a traditional/target background, but you'll need to spend more time networking with people in PE and positioning yourself well. It's more work, but can certainly be done. - Doing well in the interview: Once you get the interview, your resume matters much less. The only part of your resume that will be of interest is your work experience. If you've done some DDs, then that's definitely helpful so that they can test your business acumen and understanding of the diligence. You might also get some questions around why you pursued certain roles, your interests, etc... but the interviews will be more focused on technicals, case studies, modeling, and then just behaviorals (i.e. airplane test).
how do you think you stint at MBB would help your performance in PE? how did you prep for the technicals/modeling for PE (esp. compared to bankers, who have more experience accumulated from their work)?
How will MBB help me in PE
My three years at MBB have helped me develop professionally across a number of areas. A few in particular that I'd highlight: - People/client skills: I've had a few projects where I had heavy client interaction - I'm talking 2-3 hours of client meetings per day where I was expected to come prepared with materials and lead the session. I've presented to a number of VPs and C Suite execs, so I hope/expect this experience to be valuable as I work with our portfolio companies and build relationships with the leadership team of prospective investments. - Working independently: As a third year consultant, I'm expected to develop my own work plan and engage my superiors as needed. This can be pretty tricky at first, but I've been able to work this muscle and now feel comfortable owning my own workstream. This should nicely translate to PE as you'll be expected to run with many discrete pieces of analysis on your own, and figure our which resources you have available to tackle the problem. - Exposure to many companies/industries: I've seen ~15 different companies (through DDs and Strategy work) across a number of different industries, with varying levels of maturity (Series C to market leader). Getting to hear management talk about their short- and long-term strategy, competitive threats, etc. allows me to better understand what questions these leaders ask themselves on a daily basis, and how I should be thinking about a business.
How did I prep technicals/modeling for PE interviews
First off, most bankers recruit for PE in their first year. As a result, they might only have ~2-3 months of work experience and probably haven't even built a full model. So I don't think you're at a huge disadvantage, as bankers mostly accumulate their knowledge through IB interview prep.
I leveraged a few resources when prepping for technicals/modeling: WSO Prep Pack (Patrick just released some new models for prep), MultipleExpansion website (They have a lot of great materials on modeling/LBOs for free), Vault guide (some as banking prep, but focus on LBO/relevant sections - I doubt they'll ask you about DCFs) and then some resources from friends. You'd be surprised at how many people are willing to help out if you ask them for materials.
What made you go the consulting route VS IB if you knew you wanted to go into PE?
Great question, and to be honest, I'm surprised so many people think that if you want to go into PE you should choose IB over consulting. There's a reason why a lot of PE firms want to hire consultants.
I've had the opportunity to do many DDs over my ~3 years, which gave me exposure as to how different PE firms think about investments. I've looked at roll-up strategies, SaaS investments, retail plays, etc... and have had extensive conversations with our clients on 1) why they have a differentiated view vs other firms 2) what are the biggest risks/opportunities in their mind 3) what growth levers can they pull, etc... In banking, you don't get to have these conversations with PE firms as an analyst (at least not often). You might have a sell-side engagement where the PE firm's associate tells you what the investment highlights should be on the CIM you're making, but you're not having an intense dialogue about whether you should pull the trigger and put a $2B bid, trying to reconcile the risks/opportunities with the valuation.
I've also had the opportunity to work on a number of growth strategy projects with a company's CEO/CFO. Being able to work side by side with a F500 exec is an incredible learning experience, and helps you mature professionally at a rapid pace. Your questions quickly shift from "Where does this company manufacture their product?" to "How should we think about the trade off between having ~15% lower COGS by manufacturing our product in Thailand, but sacrificing quality and ability to go-to-market more quickly?"
Hopefully this sheds some light as to why I think MBB experience is so valuable for a PE associate. Yes, bankers can build models more quickly and know what adjustments to make to get an accurate view of cash flow. Personally, I think these skills are much less valuable than learning about a company's strategic/competitive positioning in an industry. I also had an understanding of finance from school / reading investing books, so thought I'd be better off learning about strategy than finance. At the end of the day, you have to develop both the banker and consultant skill set to be successful in PE, so it depends which skill you want to develop first.
Thanks for doing this. Currently ~6 months into my MBB stint and planning on recruiting for PE this year. Couple of broad questions for you:
1) did you leverage peers/mentors from your MBB during recruiting? e.g., partners with strong PE ties etc.
2) what are the 1-2 "I wish I knew that" when you went through the process that you can share with us?
To answer your questions:
I leveraged my peers during recruiting, but not my partners. To elaborate, I had a few friends that were 1-2 years ahead of me that successfully recruited for PE so I leveraged them a lot. They sent me some prep materials for technicals, helped me think through how I should position myself with HHs, etc. They were invaluable. While I didn't keep my PE recruitment prep completely private, I didn't ask any partners for help. I know some colleagues that got partners to reach out to their clients in PE, so I would definitely leverage them if you can / feel comfortable.
This is a tough question. To be honest, I don't have any regrets in terms of prep, and I think I was able to navigate the process with little hiccups. A lot of it comes down to prep and luck (for those who are doing on-cycle, timing is key) so I'd be lying if I said I'd 100% land a PE job. However, the two things I'd stress to people are 1) Do your diligence on firms. People often group firms together like "UMM" or "MF" but they can be very different. Do you like consumer/retail? You should probably look into Sycamore/L Catterton. Do you want to do more portfolio work? You should probably avoid a MF and look to a MM/UMM fund that hires consultants. Do you not want to do business school? Then don't go to firms that have a two and out policy. These are small things that many overlook in the prep phase but are important when you think about your career. 2) Think about what type of investing and where you want to live. For type of investing, a lot of people would probably prefer growth equity or VC to late stage buyout, but just recruit for "general PE". Do your diligence and see what stage you'd like. For city, this should go without saying but don't compromise your life for a PE job. If you love the east coast and know a ton of people in New York, don't recruit for San Francisco where you don't know anyone. You'll need a lot of supportive friends while you work long hours and it can get lonely if you move for a job with NO friends.
Fantastic answers. Thank you and best of luck with your new gig!
What was your undergrad gpa when you recruited for MBB and when you graduated?
Would hypothesize that the bar for GPA would be the same for MBB and PE (if anything, it's probably a higher bar for MBB). I had a 3.8+ GPA when I recruited for MBB/PE but no one mentioned it. Once you're at MBB/IB, your GPA becomes much less relevant. I don't think someone at PJT/EVR restructuring would have trouble landing a top PE gig with a sub 3.7 GPA.
hahah seems like the MBB "hypothesizing" thing definitely got into you. Not the first time I've heard someone (and not just one person, either) from a consulting background using "i hypothesize" in their daily conservation lol, just kinda really funny if you think about it. hope a couple years of PE changes that for you. this way of speaking does get old for non-consulting people after a while...
Funny that you flagged this - one of the areas I was told to work on at my firm was being more hypothesis driven. This really drove me crazy (I often think that consultants used select data to confirm their hypothesis and aren’t always intellectually honest), but guess I showed some improvement against it :)
yikes!?
thanks for doing this
Thanks for doing this! Can you talk more about how you came up with your ranking of funds and interview scheduling strategy?
Two distinct questions:
Ranking funds
I had a few main criteria that I used to rank funds: - City: I had a clear preference for city, so my Tier 1 firms were in my preferred cities. I made it clear to the HH that I would prioritize funds that were in these cities. Even if it was a top firm but in a city I didn't love, it was a Tier 2/3 for me - Fund size: Wanted to go a firm that had a ~$5B fund or bigger, so my Tier 1 firms were all large. Larger funds usually translates to more prestige, but some funds want to stay smaller (e.g. Berkshire Partners) even though they have a top-notch name - Returns/Firm Growth: Most UMM/MFs fall under this bucket, but I was looking for a fund that was generating strong returns, and was continuing to increase their fund size each vintage - Consultant friendliness: Two main reasons why this was important. First, I wanted to prioritize funds where I thought I had a legitimate chance of getting an offer. Second, I wanted to go to a firm that was more operationally focused. These funds normally hired more consultants (e.g. CD&R would not be a Tier 1 for me since they don't hire consultants) - Culture: This one is tough to do without doing networking calls, but there are differences across firms. I didn't mind going to firms that worked hard, but I wanted to be treated with respect and wanted to be in an environment conducive to learning
Interview scheduling strategy
This directly relates to the above, as I prioritized interviews with my Tier 1 firms. When on-cycle kicked off, I received emails/voicemails from almost every HH saying to call them back. It was ~10pm on a Saturday and I got emails under 2am that were basically "Fund X wants to interview you ASAP, call me back now to schedule a time". You can realistically only fit in 2 interviews per day (a morning slot and an afternoon slot), and on-cycle generally wraps up after 2-3 days. So if I got an email for a Tier 1 firm saying they wanted to interview me, I called the HH immediately and asked for a Sunday 8am slot. If it was a Tier 2 firm, I waited until the end of the night and scheduled it for Monday 8am. Ended up scheduling 5 or 6 interviews over 3 days (all scheduled Sat night), but ended up converting my first interview with my Tier 1. One thing to note - some firms will stop interviewing after Day 1 depending on how their day went, so you have to be very fluid and go with the flow.
Post has been very insightful thank you. Couple of questions.
Curious if you know rather it really matters which MBB firm you go to and which firms give you ample DD reps / strategy work? I know most say go to Bain if you want to go into PE but was wondering if someone had a BCG vs Bain offer would it really matter in the end given they're all strong brand names.
Can you walk through (high level of course ~ confidentiality) what actually happened on one for your due diligence projects/what did you do? and how did you explain pitch that experince during your PE interviews?
For those consultants who don't succesfully recruit to PE do you know where they ended up going?
All good questions:
1) Overall, I would say that it doesn't matter which MBB firm you go to. I've seen a BCG, McKinsey, and Bain alum at almost every PE fund that hires consultants, and seems like they group all consultants into the same "MBB" bucket. That being said, the slight advantage of Bain with respect to PE recruitment is availability of partners/DDs. It's much easier to do DDs at Bain vs BCG/McK since Bain is the market leader for commercial DD work (I think it's ~25% of their revenue). You'll be able to do a handful of PE diligences before you recruit for PE if you push for it. You'll also have partners that work with certain funds very often, and can ask them to vouch for you if needed. However, I wouldn't choose Bain over BCG/McK just because you want to go into PE - I have many friends from each of McK/BCG/Bain who successfully landed PE gigs.
2) At MBB, we mostly focus on commercial due diligence for the PE fund. As a result, we spend our time on a few main topics: Industry analysis (growth rates, margins, profit pools etc.), competitive dynamics (how are the different competitors perceived, where you fit on a 2X2 matrix of price/quality, etc.), customer analysis (how do customers perceive the target, would they be willing to pay/buy more from them, are they thinking about leaving, etc.), and end-user analysis (what is the value prop provided by the target/switching, what do they look for when purchasing the good/service, etc.). We also do other tasks such as market sizing estimates, and other ad hoc requests. To be more specific, one of my diligences was for an independent vet clinic roll-up strategy. For this, we looked into the various competitors and benchmarked them on various KPIs, did a white space analysis (how many more independent clinics can they acquire in the next 5-10 years), customer/employee sentiment analysis (Glassdoor but more in-depth), and cohort analysis (how did the stores they acquired in 2015 fare vs the ones acquired in 2018 and why). It's pretty easy to explain in PE interviews what I did, but they mostly cared about my thoughts on the investment. Did I think it was a good buy? What are the growth levers I'd pull, and what were the biggest risks? MBB doesn't touch valuation, but they can maybe ask what you'd consider paying for the target (I was never asked this, however). Hopefully this provides more color.
3) For MBB, you'll generally have the following split after 2-3 years: ~20% go into PE/VC, ~25% go to B School, ~35% leave for other opportunities (Start Up, Cor Dev, Corp Strat, non profit etc.), and then ~20% stay. Changes a lot year to year, but this would probably be the long-term trend. In terms of those who don't successfully recruit for PE, it's mostly case-by-case. They'll likely fall into one of the other 3 buckets I outlined.
Thanks for doing this, its been super helpful thus far!
1) I'm curious about your opinion on the gap between MBB and T2 when it comes to both PE recruiting and also general career preparation/development. Is it as large of a gap as people on here like to pretend or is it generally overstated?
2) If PE is achievable from T2 shops, which T2's do you think give you the best shot?
3) Do you think any T2 shops could start legitimately competing in the MBB bracket and against them?
Happy to provide an educated guess on some of these, but I only recruited for MBB so I won't have answers to all of your questions and don't want to give you the wrong information.
1) Most of the time, people on WSO overstate these kinds of things, but I think there is a pretty big gap between MBB and Tier 2 consulting firms. To put it into context, the gap between MBB and tier 2 firms is much larger than a PJT/EVR RX to a Moelis. In terms of PE recruiting, look at the the associate class on the team page of the PE firms' websites. When they hire consultants, ~95% of the time they'll be from MBB. Some firms that mostly hires consultants (e.g. Charlesbank) has associates from OW / EY-Parthenon, but it's still mostly MBB. In terms of career development, this is very hard to say. If you're coming from an Oliver Wyman for example, I'd say the gap is minimal. They are direct competitors with MBB for many of the "sexy" strategy cases. However, the Tier 2 consulting firms that do less strategy work and more operational/implementation work are extremely different. You won't get exposure to senior clients as much, and the problems you face with aren't as strategy focused. So the gap for career development will be larger in my opinion.
2) The answer above covers most of this. To be honest, I don't even know which consulting firms would be considered "tier 2". Your best bet is to look on the team page of all PE firms where you'd be interested in interviewing and then seeing if they've hired from that consulting firm in the past. Even if they haven't, if you really want to go into PE then put in the hours, network well, know your story/technicals/modeling cold and I think it's feasible.
3) Interesting question. Consulting is an insanely fragmented market, and MBB doesn't have a large share of the global/NA market. There are so many types of consulting, and MBB only plays in a small portion of consulting services, mainly focused around management/strategy consulting. In terms of prestige/brand name, I don't think a firm will join the MBB grouping any time soon. It takes a long time to build a reputation, and clients tend to stick with their consultants for a long period. ~70%+ of MBB revenue comes from recurring clients, so it would take a series of big missteps in order for them to lose the prestige (or for another firm to steal their clients).
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Thanks for putting this together! Super informative set of posts. A few set of questions:
1) Two main reasons: - When I was ~1 month into the job, I reached out to a couple of alumni from my firm who were in PE. I asked them about pros/cons of staying an extra year and they both really enjoyed working for ~3 years before PE. They felt that they matured a lot in their 3rd year, didn't want to go into PE without seeing if they liked consulting first, and generally didn't feel a rush. After going through my 3 years, I would agree with what they recommended. Your career is a marathon, so doing 1 extra year of MBB doesn't hurt you in the grand scheme of things (can even help build stronger relationships at your firm). It even gives you the chance to get your life in order (1 extra year of weekend-free work) before diving into PE and putting your head down again. - I honestly didn't feel ready enough to recruit when the HHs started to reach out. You only have ~1 shot at PE recruiting, and if you drop the ball during on-cycle it will be very hard to get another interview with a top firm. Would much rather "delay" my PE start date by 1 year but have a ~50% higher chance of landing an offer.
2) Surprisingly, I don't think the bar for a second year was higher when I was interviewing. Most firms care about getting the most prepared associate who will do the job well. The interviewers probably understood if the IB analyst didn't have any real experience on their resume when interviewing, but I think having 1 year of work experience was an advantage. Most interviewers said things like "Oh you've actually done something in your career beyond spreading comps for a summer". It gave me a bit more credibility when talking, and led to some great discussions about why I want to do PE and how my experience will help me succeed in the associate role. The modeling/technicals asked were also the exact same across candidates - if you don't get them right then you'll get cut from the process, there's no slack given. I think the reason why so many people recruit for PE right away from IB is because they hate banking, and also because of herd mentality. Do what you think is right for your career!
Quick follow up question - are HH willing to delay on-cycle recruiting for a year / give a look after a year, compared to only in first year where most people recruit? Mostly curious as to whether you'd consider your experience more a unique/one off experience.
And thanks for doing this, it's really helpful stuff!
Hey,thanks for doing this! How much does office location matter when recruiting for PE? Secondly, how much emphasis did you place on refining/building new modeling skills?
How much does office location matter
From MBB, office location doesn't matter too much. It's slightly more impressive to be from the NY/SF office versus a random city, but the difference is minimal since consultants are travelling all the time anyways.
The only time where office location plays a meaningful role is during the networking/interviewing period. When networking, it's much easier to grab a coffee with someone in your city, attend a cocktail/dinner, etc. And then when you interview, it's easier to walk ~10 minutes than fly for ~3 hours and wake up at 4am. Overall, it's easier if you live in the city where you're recruiting but it can certainly be done if you live outside your city.
How much emphasis did I place on modeling
Didn't place too much emphasis here, but enough to crush a 1 hour LBO test. I had a good foundation for modeling/finance, so I spent ~10 hours practicing paper LBOs and 1 hour LBOs. I didn't touch a 2-3 hour LBO because I knew I didn't want to interview at a shop that required an extensive modeling exam.
Do you feel like you actually learned anything from MBB? I keep hearing that consultants don't know anything but how to solve problems like no transferrable skills. I feel the same way even though I am a banking analyst. I know how to pull research on shit and put together slides that make sense based on the research. Modeling isn't anything special and we don't do anything extremely complex.
Great question. I feel like I've learned a lot, but haven't mastered anything.
In terms of hard skills, I don't think I've mastered anything. Yes, I know how to do some modeling, pull research, comb through reports and generate insights. However, i'm by no means an expert at any specific topic. So I completely agree with you on that front.
What consulting (and banking) does teach you is how to be good at learning about something new very quickly, being data driven + being error-free in your analysis, leveraging your resources effectively, managing upwards (managers, partners) and downwards (analysts) effectively, communicating well, etc. These are all super important skills, but hard to identify as tangible benefits from consulting/banking.
In my opinion, the reason why companies love former bankers/consultants is that we've shown tremendous growth across these dimensions, and it's rare to have someone at such a young age with these skills. As a hiring manager, I know that this person will be someone I can count on to deliver a quality and consistent work product.
This is a great answer and probably not talked about enough. It isn’t that hard for someone with the intellectual chops to learn a “hard skill” on the job. The skills you mentioned, however, are impossible for most corporates to develop in-house.
Yes, it's like we don't really know anything but come out of the field with the foundation / skills to be able to do anything we want. How does that sound?
I've been thinking about it and after banking, I'd for sure want to go back to school and become specialized in something where I have the foundational skeleton of skills to utilize that knowledge and succeed.
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