Q&A: PE Associate at a single-sector mid-market fund

Bio:

* Currently an Associate at a sector-specific European mid-market fund * Previously an Analyst at a smaller boutique * Started out at a "global" investment bank * Undergrad from a continental European uni and post-grad from a business school in London

Ask me anything:

* Hope to provide some insight into getting a job in London, especially coming from outside London/ UK * Otherwise open to answering any other questions you might have!

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Comments (45)

Jun 1, 2019 - 5:15am

Easier than the other way around. Unless you speak European languages I higly recommend targeting UK focused (LDC is one) shops or shops that have local teams ie Equistone - what I mean by that is that the london office is only working on UK deals, french office on french deals etc.
Note that many of these shops have a very 'British' culture and often hire from the Big4 too.

UMM will be very hard unless you speak european languages.

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Most Helpful
Jun 1, 2019 - 3:42pm

I think across the different stages of PE recruitment, the following points are key:

1) reaching out to the right headhunters with a super polished CV, particularly focused on deal experience

2) (good) headhunters will be the first to talk hiring managers through your profile - make sure they know your motivation for the buy side and make sure it is authentic

3) in my experience, 1st rounds will be mainly focused on your motivation and background. The candidate that stands out will have a clear story to tell, a) why PE, b) why that specific fund. Have this locked down. And did I mention - be authentic.

4) there should be no questions around your technical skills... ever.

You'll see the occasional VP coming across, but I think it's pretty rare. Same for higher level guys. They're often tied down with clawbacks, options, etc., so there has to be a pretty good reason to jump ship. Also, advisory is inherently different to investing, so the longer you're working in one, the less employable you become to the other.

Jun 1, 2019 - 9:29am

Do you believe an Mfin at a target school (LSE/LBS/Ox/MIT) will be competitive for entry level analyst positions at some of the PE shops in town? Or do most shops exclusively hire people with a couple of years at a BB or straight from MBAs?

Jun 1, 2019 - 3:57pm

MBAs are rarer in Europe than in the US. Most PE recruits will be between Analyst 2 and Associate 2.
A top tier degree (finance, economics, etc.) will open a lot of doors.
For the very few Analyst positions at PE funds, this can be extremely useful. I think mainly because you will need outstanding internship experience. Coming from a top uni, you are much more likely to get into a good shop for an internship.

Jun 3, 2019 - 5:02am

As a single sector fund, do you feel like you have (as an institution) built significant internal knowledge on the sector? Do you feel this edge when attending initial meetings, quickly assessing opportunities, being in a competitive process, etc? Or do you still mostly rely on external professional focused on the specific niche?

Do sellers and/or management team express any interest in having you as investors based on the industry specialisation, as opposed to either generalist teams or sector-specific groups at generalist funds?

Finally, how often can you actually extract synergies and force portcos to interact?

To give context, I'm asking all those questions as working at a generalist PE fund, I was slightly disappointed to realise how little operational and industry-specific knowledge is built over time, while industrial know-how is always "outsourced" from external professionals, and very little co-operation is actually achieved within portcos (even if operating in the same industry).

Jun 4, 2019 - 2:34pm

tl;dr response:
No sector specialist fund without being a sector specialist. You'll pitch yourself as a specialist and are invited to processes because of that. You will/ should need little or no advisors.
Little or no synergies among portcos.
Industry knowledge built is vastly greater at a specialist fund as you're expected to grow into a sector expert fairly quickly (probably 2-3 years).
Full response:
I would say most sector specific funds will be borne out of inherent knowledge of that sector, be it seasoned bankers, someone with an entrepreneurial or operational background, or someone who ran a sector team at a larger fund starting out on their own, etc. In my view, for any fund to focus on a single sector, there has to be intrinsic sector knowledge before you even begin to fundraise - otherwise, what's your value-add?
When it comes to management and sellers' meetings, you will engage with them on a completely different level compared to a sector agnostic fund. Your pitch to the seller is based on your ability to support and help drive growth with knowledge and expertise/ experience, rather than writing a cheque. The sellers' field is very much split into these two sides: companies looking for funding and companies looking for a team of experts to help drive growth.
There is some degree of reliance on advisors, for example when entering a new geography or sub-sector, but this is mostly focused on expert calls and perhaps CDD. In most cases, you'll only need FDD and LDD, as you already have deep knowledge of the sector and the geography you're looking to invest in.
In my sector, almost all of the handful of sector specific funds will look at all same assets coming to market, regardless of size. You'll often see a larger fund team up with a sector specialist if it's a larger deal and the specialists going alone on smaller tickets.
Synergies between portfolio companies are extremely rare in my view and will mostly be client introductions and cross-selling. But in my experience, cross-selling between two companies within one group is already pretty difficult to achieve, let alone between two independent companies.
I can see how the specific sector knowledge built over time at a generalist fund is very little. Think about it like this: I will look at c. 20-30 deals a year in my sector, 5-8 of which in thorough detail, developing a strong knowledge base of the sub-sectors that I can build on through each deal. Assuming at a generalist fund you will look at the same number of deals, but only 1-2 in each sector in thorough detail, it'll take you some 5 years or so to develop the same level of knowledge a sector specialist acquired in 1 year… not to mention that there is an exponential learning curve involved…

Jun 7, 2019 - 10:28am

Thanks for the AMA.

Would London-based private investment firms be interested in someone in the U.S. with 2 years banking experience then 2 years growth equity experience?

Also, to the extent you're familiar, would interesting software companies be interested in this profile for corp dev / corp strategy roles in London?

Thanks!

Jun 7, 2019 - 2:06pm

Maybe.

Factors that will boost your chances:
1) Eligibility to work in the UK (no one will sponsor a visa)
2) European languages (fluent!)
3) Outstanding deal experience in relevant sector

There are tons bankers and junior PE guys in London (same as in the US...). The way to get into a room with people that matter is to stand out from the crowd.

In your case, you seem to have fairly specific knowledge that will be relevant to a select number of funds. Identify those funds and find an angle to make yourself stand out, would be my advice.

I can't speak from experience re corporates. Generally, they'll look for someone with great deal experience. International firms will also have better means of being accommodating to your circumstances, e.g. visa, etc.

Jun 7, 2019 - 2:17pm

Proven M&A execution experience.

LevFin and Sponsors generally stand a good chance. It will depend on your experience and who you've worked with, however.

In my experience, the people from these teams that have moved to the buy side will go to a fund they've worked with (extensively).

I think it is important to understand that in PE you'll work on all aspects of the deal (execution, funding, strategy, etc), which rarely happens as a banker. The more experience you can gain across these, the more interesting you'll become to funds.

Say, you're in LevFin, working on a deal for a PE. See that you can get stuck in on the modelling or at least understand enough of it to be able to discuss eloquently in an interview. Same if you only worked on M&A execution and the likes.

Jun 9, 2019 - 10:26am

Are you aware of people moving over from Direct lending to PE?

Would you advise I go back into M&A at a good shop, then have a crack?

Also - are you aware of any PE funds I could opportunistically reach out to now (either just started) or that are actively looking?

Jun 9, 2019 - 6:15pm

I'd say it's a rarity as the skill set is quite different. In PE your modelling and DD work will be of much greater detail, for example. You'll also look at businesses from a strategic and operational point of view, rather than merely a financial one (in the mid market anyway...). Out of PE and into Direct Lending is a much more common route.

The thing with moving back to an advisory role is you'll have to explain your motivation moving from lending to M&A, which can derail your changes unless you have something really solid. For you to have sufficient M&A experience, you'll need at least 2 years on a desk, which could put you quite far down the career path. The PE window of opportunity is very small, so that might also harm your chances. I'm not sure there is a great deal of value in going down this route.

In terms of reaching out opportunistically, the best timing is when PEs begin fund raising. Follow the news around fund raise announcements and you'll get a pretty good overview.

Jun 27, 2019 - 12:43am

Given the single-sector focus, do you ever think... what if this sector turns? Is the sector diversified enough? As much as it's great to be a specialist, it seems like placing all your eggs in one basket.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

Jul 9, 2019 - 12:50pm

The advantage is, every sector will have verticals that are cyclical and verticals that are counter-cyclical, so a downturn in a sector 1) doesn't usually affect all companies alike and 2) isn't necessarily a bad thing. Especially in PE where you're in the business of buying and selling, this works to your benefit.
This would apply more to a product specialist rather than a sector specialist. If you're in ECM and the IPO market is hot - great. But you do run a risk of it turning cold and you getting the Deutsche treatment.
If I'm a health care investor and the valuations are full, I start considering exiting businesses, even if it's earlier than originally assumed. If the market is in a downturn, I start looking out for discounts. Obviously this is an oversimplification, but I think you get the idea.

Jan 15, 2021 - 5:54am

Hi Escobar, 

Thanks for doing this. Really interesting.

I have c. 4-5 years of experience in M&A (o/w 3 in continental Europe and 1 in UK) and am now interviewing at MM PE shops in London (early stage, havn't had any interviews yet)

I have 2 questions for you:

1) You mentioned in one of your answers "that there should be no questions about your technical skills". Does that mean that there are no technical questions in interviews or that I should give no doubt about my technical skills?

2) What level of compensation and grade should I aim to get? Are they basing compensation on what I have now or do they have internal standards? 

Thanks for your help

Jan 21, 2021 - 10:05am

1) you will most certainly be questioned on your technical skills (direct questions or modelling tests) and you should be able to answer any technical questions

2) this can vary quite a bit in my experience and not necessarily based on size of fund or performance. you'll probably fall below top-paying banks for base, might make up some of the gap with bonus being a higher % of your base. Your current base will probably be used as guidance when you get the offer stage, but most funds will have a fairly structured pay scale

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