Q&A: Lower Middle Market PE Associate -- Ask Me Anything

Figure I'd try to give back to the WSO community here. I'm wrapping up my 3rd year of PE at a LMM firm (think $500-750MM fund size) located outside of NYC. Technically still employed but headed to b school this fall and have rolled off a lot of my deals / portcos so have a ton of free time these days. For background, I went to a state school for undergrad and worked at a BB in NYC before moving here. Happy to answer any questions you guys have.

 

OP Here: Forget the password to my burner account like an idiot, so here's my new one

To answer your question, B-School admissions were a mixed bag. This is anecdotal, but among the 30 or so people I know at similar funds both in my city and in NYC, maybe 10-20% got into one of H/S, maybe 30-40% got into Wharton, and maybe 70% were accepted somewhere else in the MBA business schools">M7. This is much lower than my friends at bigger funds who were maybe 50/50 at H/S and 75%+ at Wharton. I've heard that even the top MFs are less of a shoe-in for HSW than they have been in the past, which has a cascading effect as move down the pecking order,

It's just generally a pretty tough spot to be in because you're in the most competitive bucket at the top schools and most people competing for spots are more or less the same. Absent a really compelling narrative, admissions committees are almost always going to lean toward the person with the best brand names on their resume. None of this is to say it's impossible to get into b school but you should calibrate your expectations accordingly. Most people I know ended up at an MBA business schools">M7 and are very happy with the experience, brand, recruiting ops, etc.

 

Sure, timeline was significantly after the on-cycle process. My year on-cycle kicked off in February and I interviewed with my current firm in September. There seems to be a decent sized wave of recruiting opportunities after labor day and after new years (~9 and 6 months before your analyst stint is up).

I did no networking and was plugged into the process by a headhunter but being on the other side of the process now, we put a lot of weight on internal referrals so networking certainly helps.

Modeling test is just a standard LBO. It's honestly just a check-the-box exercise and people don't read into it too closely as long as it makes sense.

 

Thanks for doing this, couple quick q’s

  1. What types of candidates did your LMM PE firm primarily recruit? Did you guys ever interview buy side analysts out of school, particularly those that did investments across the capital structure (senior, mezzanine, and equity)?

  2. What was your recruiting process like? What was the extent of the modeling test and case study?

  3. What were your hours like in LMM PE? What % of work was on new deals vs portfolio management work?

 
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  1. Vast majority of candidates are former bankers, both from BBs and MM firms. We've also hired a few folks from lending and mezz backgrounds but the bar is higher. The idea there is a BB / MM analyst program is a very known quantity and we can design the associate role and onboarding program around that while it's tougher to know where folks from off the beaten path are. Networking is super helpful here because we care quite a bit about internal referrals.

  2. Recruiting process is fairly standard with a first round phone screen with a VP, followed by a weekend case study and a super day. We typically cut half at each stage (e.g 40 phone screens > 20 case studies > 10 super day invites) and hire 2-4 kids per class. The case study is pretty simple--you get a redacted CIM from an old deal and have the weekend to pull together a model and short deck outlining how you think about the investment and what your recommendation is. 99% of the weight is on the case study--we're looking for structured thinking and the ability to come up with good questions.

  3. Varies, obviously, but overall pretty good. Maybe 9-7pm in the office with another hour or so at home at night when there isn't much going on (reviewing CIMs, slow burn portco projects, etc.) but ramping up significantly during the deal process (100+ hours for the weeks leading up to an IC meeting). I will say there's much less downtime than in banking as most of my day is booked up with calls and meetings where I'm actually expected to actively participate, so it's more draining than the time commitment would indicate. Weekends are typically free but I'll usually spend a few hours on Sundays getting ready for the week.

 

We'll hire people for the usual diligence streams (QofE, environmental, tax, etc.) but market diligence is almost all in house. We'll occasionally hire someone for a really specialized diligence task but there has to be a really compelling reason. This is sort of frustrating since my friends at MFs will spend millions of dollars per deal to hire Bain or LEK to run a diligence process for them while I'm stuck doing expert calls and surveys myself. Great learning experience though, since you really do feel like a ground up expert on a space after researching it.

 

Thanks for doing this. LMM isn't talked about as much on here but have found it to be a good experience (only 2 years in that is..). A few questions:

  • How did you think about b school (to go vs. not go)? Was the decision made for you by your firm?

  • Do you plan to return to PE? To the same firm?

  • What do you anticipate are going to be the critical skills for you as you go from associate / sr. associate to VP/principal?

 

1) If you could go back to PE recruiting, would you aim for a MM or UMM fund, or are you happy where you ended up?

2) What was your banking experience like? Would you have considered staying?

3) What is your plan post MBA? Is there any chance of you moving upstream if you go back into PE?

4) What was the comp like at the senior level?

 

Thanks for doing this.

1) what was the decision behind going back to business school? are you unable to get the promote by staying at your fund?

2) do you think someone who doesn't have the best finanical accounting knowledge can survive in PE? for example, I come from an ECM background and can comfortably complete all the DCFs and LBOs case studies online however I struggle with operating models/three statement modelling and the accounting knowledge

3) how do you / your firm source deals?

4) after an acquisition/investment do you get involved with the strategy of growing the business through expansion/cutting costs? if so how does it work and who makes these decisions? or do you take a passive approach?

5) what are your hours like during live deals?

 

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