Q&A: Barclays IB to MM Private Equity
Background
- I was previously at Barclays (NYC) in investment banking as an analyst
- transitioned to a middle-market leveraged buyout private equity firm where I've been for several years.
- I offer detailed resume reviews (have to-date reviewed over 350) and interview coaching for prospective undergrads and MBA candidates trying to break into IB
- I'm a WSO Mentor - click here for my profile
Recruiting for Private Equity or Investment Banking
- I also can assist current IB analysts trying to break into PE
- I participated in PE recruiting (on-cycle) and know the process inside and out
Ask me anything, happy to help!
WSO Podcast: Barclays IB to MM Private Equity
Member @WSO Mentor shares his path from a bulge bracket investment bank (Barclays) to a middle market private equity firm. What he wishes he did for private equity recruiting, some unexpected advice on which investment banks to target and whether or not he'll get an MBA. Hope you enjoy (listen below).
Thanks for this. I'll start.
When did you know you wanted to break into PE (before you started at Barclays?)
The on-process PE recruiting cycle has moved up dramatically every year in the past few years...now to such a point where candidates are interviewed over 18 months before their start date. Do you see this continuing and is it something that your firm is trying to cut against the grain on or following the game theory approach and jumping when everyone else jumps? What do you see as the end game here?
What was the hardest part about your transition from IB to PE?
Thanks! Patrick
Thanks, Patrick. Responses below:
I knew I wanted to break into PE once I started. IB is a great segway into PE in that it helps you develop critical analytical skills that will ultimately allow you to develop your investment skills in a buy-side role. Most of the analysts in my group participated in PE recruiting and so it was largely a part of the culture at Barclays.
Unfortunately yes. I see this continuing. Analysts that wish to go to upper middle-market and mega funds have to be PE interview ready within a few months of being on the job. I am hoping the PE firms realize the absurdity, but in their mind they don't care. The banks spend a lot of time and money training the analysts, and the PE firms are happy making a bet if a candidate is at a top group at a top bank even though they've only been there a few months. If the PE firm is wrong and the analyst ends up being a poor associate once they transition to PE, they are willing to let that happen and just make it up the next year with another hire. The risk reward is low for them so they're willing to hire someone with little to no experience and hope that the bank trains them up and that they are associate ready by the time they start.
Hardest part of the transition was having little to no deal experience and interviewing pretending like I knew how PE worked. You have to spin your IB work to act like you think as an investor and use your limited experiences and modeling skills to land the job early on. Once I started, there is a quick learning curve and you have to react quickly. There are less layers in PE. You can't hide behind your associate or VP if your work is wrong. You have to take ownership and not just of the work but have a opinion and be able to articulate the conclusions you draw from it. Transitioning from an IB role (quantity matters) to a PE role (quality matters) is the hardest part.
Thanks for this! Congrats on an awesome career thus far.
Thanks for the questions. Responses below:
Culture is very good. Arguably the best of the buldge bracket banks. They do a really good job hiring.
Could be as little as 70 hours a week to as high as 3-5am nights every week. Varies by deal activity.
No, in banking you never have to go back to get your MBA. That's in PE only. Banks want you to stay all the way from analyst to MD. No one goes back and gets their MBA. In the old days they did, but not for the past 15 years.
Sorry for the late response but thought of a follow up related to the work hours question.
Have seen that done before for other firms but since you mentioned the culture is arguably the best, I would be severely curious to see your input.
Thanks!
Why did you decide to got to MM PE? Did you interview for MF/UMM?
I directed the headhunters to focus on MM PE vs trying to get into UMM or MF. MM PE was a better option for me as I wanted to do good deals and learn the transaction process through and through vs doing the "largest" and "sexiest" deals. Typically UMM or MF funds are just like banking (banking 2.0) and the associates just model all day and don't get to participate on really value-add aspects of the deal and investing process. That wasnt for me.
Did you work in a coverage group or product group at Barclays? Is the PE firm you work at related to that? How did you prepare for PE recruiting and what made you successful?
Coverage group at Barclays. PE fund not specifically related (we're more generalist).
PE recruiting is very tough. You really have to grind. Understand your 'deals' through and through and how to convey them concisely and accurately to someone at a PE firm
Thanks for doing this.
I was at a target school, yes. I don't think it matters, though. Look at most PE fund websites - a lot of the associates and mid-level folks went to non-target schools as well.
College seniors honestly shouldnt be focused on PE. They should be focused on preparing for IB. PE recruiting will come and you have to leverage your fellow analysts to prepare (not much you can really do before besides educate yourself on the process). If i had to do it all over again. I would have recruited as a 2nd year analyst. I would have been way more prepared. I recommend doing that.
Did you see any 2nd year analysts go through recruitment? If so, how did it compare to oncycle?
I did an IB internship last summer and will be at an EB this summer. I really liked my internship last summer and if this upcoming one is anything like it, I’d like to give banking a shot before immediately jumping into the PE recruitment grind. Other than normal preparation, is there any advice you’d give to someone looking to (potentially) recruit 2nd year?
Were you in a top, mid-tier, or bottom-tier group? How did that impact PE recruiting?
Mid-tier coverage group. Definitely made it a bit harder but any coverage group besides Real Estate or FIG is fine.
Is there a reason why RE or FIG coverage groups may make it more difficult?
I can't stress this enough. Stay AWAY from Real Estate (regardless of bank) and FIG (regardless of bank perhaps except if you're at Goldman FIG)
Thanks for doing this!
In terms of coming from a mid-tier group, what did it look like to leverage fellow analysts in helping in the PE recruitment process? Does your group typically place well and how did you see your group’s rep impact your process personally?
My group placed well. I definitely leveraged the 2nd years to hear how they went about the process. They helped with how to deal with the headhunters and how you should prepare (presenting your deals, modeling, etc.)
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I've seen often times that it goes P&U NYC > FSG LA > NatRes NYC as the three groups that stand out and place the "best"
Correct me if I'm wrong
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how would you talk about deal experience in an interview? i’m an undergrad coming off an internship at a large canadian pension fund’s direct PE team and most of my transaction experience has come in the US UMM space. seeing that’s it’s my first deals finance role, i’m just wondering how to articulate this experience going into banking interviews. I already think I know the deals cold but wondering how the questioning would acc look like.
It's an art. Translating deal experience as a sell-side analyst for a buy-side associate role is tough. You can't present the work you did as that isn't important. No one cares that you built a fancy model. They care what you thought about the deal. How it was merited, what work was done to validate or prove something, and what drove decisions and how you thought about it.
Thanks for doing this! I'm almost a year through my associate tenure at a fairly well known middle market PE firm. Have been fortunate enough to close a platform and would love to hear your opinion on a couple of things:
What are some things that I can do to continue building my skills and experiences in the second year of my associate program?
What's your view on MBA vs. lateraling / trying to advance within the firm?
Thank you!
Focus on digesting data and articulating a view. Don't just do analyses and send them to your sr. associate or VP to review. Have a view, each analyses should tell you something and you should be able to summarize a lot of disparate data to form a view really quickly. Also focus more on diligence and legal. Learn how to read and interpret credit agreements and SPAs and spend time asking your Principal and VP why negotiating specific points matter. The biggest gap I see is that associates do well but can't make the transition to VP because they can only do analyses but can't negotiate and quarterback a deal.
If your firm lets you advance great. Otherwise, I'd consider a lateral. No need for B-school, there really is zero benefit if you're already at a good PE firm. It can help you jump to VP, but you also have to spend two years without pay doing case studies with a bunch of operations and marketing people etc (I'm exaggerating but you get my point). Why not just take two more years on the job to develop (make money) and try to move up on your own?
Thanks! A couple quick follow-on questions:
Appreciate your input!
Hi thanks for doing this! What size fund would you consider MM vs UMM? What size EV?
Also, I know you said that you would advise doing recruiting as a second year analyst, but wouldn't that basically mean that you're committing to 3 years in banking? Or do you know many people who were able to do on-cycle their second year and still only do 2 years in banking (I.E. they secured a PE job only 8-10 months out rather than 18-20 months)?
I'm a college senior right now and am strongly considering on-cycle in the fall. Have you heard of people striking out as 1st year analysts on-cycle and then having an even worse time re-recruiting again on-cycle as 2nd year analysts? (Like are HH's not going to help you if you blew it the first time around?)
I'll be at decent placing NY bank and have a lot of IB internship experience and am very convinced that I want to get out of IB as soon as possible (but also want to exit to a well branded Buyout shop). Thanks!
MM is so broad these days. American Securities still calls themselves MM.
I generally say that any PE firm that invests in cash flow companies (i.e. not growth) of EBITDA from $10mm - $40mm is considered MM. Fund size less relevant, its more about the check size.
Good question. I've seen both. But would rather commit to 3 years in banking and place better than try to recruit early, fail (or not get a good offer you like) then be screwed for next year. Sometimes you can still have a more near-term start date if you recruit as a 2nd year, sometimes you have to do another year in banking. But to me, its a much more thoughtful and safer approach.
THE LAST THING YOU WANT TO DO is do on-cycle and strike out in the fall. Good luck recruiting later when the headhunters think you are damaged goods. Another reason to delay to your 2nd year.
Thanks! That's very helpful although admittedly a bit discouraging. What do you think of this strategy:
Recruit for my top choice funds in my top choice cities my 1st year (if I get an offer great! Only 2 years in banking and top choice - win win)
If I strike out, then recruit for lower tier funds in less desirable cities in my 2nd year cycle. (The thought here is that maybe HHs would think "okay he wasnt good enough to get the super competitive bigboy funds his first year but now hes trying for funds that should be easier to land, so we'll still help him out")
What do you think?
any advice for 2nd years who are preparing for the upcoming recruiting process? do you think there's anything I can do right now besides studying up and understanding my deals better? do you think cold-emailing will make a difference? (personally i'm interested in LMM-MM but you can address advice to any sized fund if it's important)
So deals deals deals. Thats the biggest point I want to stress. Communicating this effectively is not easy. Any monkey analyst can prepare and ace the model test, which is more of a check the box. Keep practicing and trying to articulate why your deals matter and what your view was. The thesis and risks and how they were proven or disproven.
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Chemicals is typically a small group. Nat res is solid but in NY they do all MLP work so it's not as solid of an experience.
Thanks for doing the AMA!
What are the typical hours like at your current firm (normal time/busy deal time, etc.)?
How is the culture like? Does the firm also treat people well (like unlimited seamless, etc.)?
What is a typical deal team structure and work streams that each does (assuming very senior people just oversee the process)? How much (depth) due diligence does your firm typically do, and what types?
Are you involved on the portfolio management side? If so, what are those tasks/responsibilities like?
Do you think there are much differences in the types of work between MM/UMM/MF? You mentioned earlier that at MF associates are just running models all the time - in that case, who's doing the other transaction work? I'm really curious how the deal dynamic is like at different types of PE firms, realizing there are more nuances than between banks.
What were the biggest criteria you considered when you went recruiting? Would you have left an offer on the table for a better one? Does your answer depend at all on whether the firm will retain you after 2 years or kick you out?
How did you prepare for your interviews? What about for the modeling test? I've friends who say that have to bake in NCI or mgmt rollover, which is more complicated than what they've done or seen in their models.
Hardest interview questions? (How did you prep or get through those?)
Know I've asked a lot and really appreciate your answers!
See responses below:
pretty good. I usually get in at 930, and during the craziest times of being busy, typically don't ever stay past 10/1030. On average I leave btwn 7 and 8. On slow days, I'll leave at 6.
incredible culture (this is not merited on seamless). I work at a small MM buyout firm and so it's more on the day-to-day, working with people who genuinely are good people and want you to develop skills and move up. If they're invested in you, that's how you know you're at a good firm.
Associates and VP's dop everything. Principals and the MD are pretty loosely involved in diligence. We pursue MM services companies (think healthcare svcs, government svcs, distribution, business svcs etc) or companies that are asset lite and conducive to a buy and build strategy. Our typical platform investment will have 3-5 add-ons completed before exit.
yes i am. you have to be. I help with KPIs, financing processes (managing relationships with lenders etc., and other ancillary tasks that we can be helpful with to the CFO and accounting teams)
I do everything. Modeling / analysis, investment decks, negotiating docs (SPA, credit docs etc)., engaging with management, engaging with advisors and bankers etc. At MF firms, the associates do not. The VPs and up do all the external communications. The associates do all the grunt work and don't see the process all the way through a lot of the time.
Tough to say. I wanted a place that wouldnt make me get my MBA and one where i could co-invest / get carry (its all about participating in the ups; no one ever got rich on base and bonus). I wanted a place that would be a good learning environment for me to get a lot of responsibility and have a long leash and truly learn how to be a good investor and get deals done. I knew this would be MM, but you have to meet firms and people to have a sense of what works for you and what doesn't seem like the right fit.
modeling test is least of your worries. its more of a check the box. even if complications are thrown in (mine had a 338h10, rollover, and promote), but you just have to keep practicing in your down time. It's how you articulate your deals and experience that sets you a part. Literally any monkey can model, its all repetition. You're evaluated on your ability to think like an investor.
getting grilled on your deal experience is by far the hardest parts of the interview and why you have to know them down-pat. they'll ask you questions that you hadn't thought of (because they think through the lense of an investor, and you're still primarily thinking through the lense of a banker) so you have to be able to think on your feet and articulate something that makes sense.
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