THEN and NOW: @CompBanker

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Hello WSO! It has been really fun to re-engage with the WallStreetOasis these past few weeks after a long hiatus. Below is my contribution to the THEN and NOW series started by @WallStreetOasis.com" a few days ago. As always, comments and questions are encouraged!

When did you first join WSO?

I joined in the Fall of 2006 as member #3119! Fun fact, you can see which member you are by looking at the number in the URL when you go to your own profile page. Now here I am, 60 new topics and 3,650 comments later.

Why did you join? Where were you in your career then?

I had just accepted a full-time investment banking job and knew very little about what I was about to embark on. Information on the industry was super limited. I didn't have a single friend in the industry. In order to learn as much as I could about the job, I was just aimlessly googling and encountered the forums. I spent a few months browsing the forums before actually signing up. At the time, WSO itself was barely more than an online forum, known as www.ibankingoasis.com. It is very impressive to see how WSO has grown since those days (huge kudos to the team). The amount of content available today is incredible!

During this time I actually made a post about my experience breaking into the industry (November 2006). It can still be found on the forums here, as much as it makes me cringe reading posts from myself 15 years ago: How I Got Into Banking

I have always found WSO to be a very valuable resource and the first thing I suggest to folks that network with me is to review this site! In fact, I just did some digging and found a post from six years ago reflecting on it. For those that care: How WSO has Enhanced my IB/PE Career. But more than just helpful, it has been fun. I have always enjoyed teaching (potential post-PE career!) and this is a great method of providing impactful advice to a broad audience. I also really enjoyed meeting a number of folks from WSO at the conference in NYC (2013?) and at meetups.

Funny story: I went to a few local meetups a couple years back. While I am in my 30s, I look rather young for my age. I would go to the meetups and just sit there casually listening and socializing with the rest of the crowd. Usually it takes about an hour for people to figure out my background, at which point the dynamic changes and I convert to giving advice. I'm going to try to get to more WSO meetups in the future once we start easing off the social distancing.

Where are you in your career now?

My career has been pretty linear in the grand scheme of things. I completed my two years as an analyst before moving to private equity in 2009. The next 11 years I spent working at two different PE firms, as well as took a pause to get my MBA full-time. I have received promotions along the way and continue to be in a traditional investment role. My core responsibilities have always been execution oriented (acquisition, investment monitoring, exit), although I've spent some of that time on deal origination and firm administration. Personally, I have either served as a director or participant on the Board of Directors for 10+ companies.

What can you share about your personal or family life?

I am not married (by choice, I swear!!). While I have had a few serious girlfriends, I have always prioritized my career and enjoyed the freedom that comes with being able to make major life decisions on my own. Many people don't understand this, but I think it is paramount that one takes the time to understand oneself and pursue a life that fits their own mold and not others'.

For me, the focus of my personal life has always been on professional and personal development. I view time as a precious resource and always try to allocate my time in a way that improves me. More specifically, I have a set of personal goals that span major categories including intellectual, physical, and skills-based. I try to balance out the three so that I don't get burned out from a single category or deteriorate to much in another! While I derive enjoyment from these activities, I do have a handful of purely fun activities as well!

Looking back on your career, is there anything that you thought you knew starting out which turned out to be wrong?

I was pretty naive when I started work. I have always taken the approach that as long as I deliver top quality work, I will be rewarded appropriately. While this is certainly important, I vastly underestimated the influence that "office politics" has on ones career. I have learned to navigate the complexities of the office environment ... whether it is communication style, when to step in, when not to step in, who to build allegiances with, you name it. However, I was oblivious to this in the beginning. As unfortunate as it is, this is a critical aspect of ensuring an accelerated promotion track or that you're brought into the loop on important decisions.

Similarly, eliminating biases is impossible, and consistency in the workplace is equally impossible. I started managing pre-MBA PE analysts/associates nearly 10 years ago and it really opened my eyes. I couldn't help it ... people who I liked got better treatment. I was more willing to invest in their personal development, approve their vacation and cover for them while they were on vacation, or trust them to work from home. I am almost embarrassed by the difference in behavior that the same person can display to two subordinates in the exact same role. This works all the way up the chain to the partner level as well as with service providers, limited partners, you name it. Whatever you do, make sure you're viewed favorably by your superiors. First impressions go a LONG way here.

Were there any opportunities that presented themselves along the way that you didn't take? With the benefit of hindsight, do you wish you had taken one of them?

This is tough. My career has gone so well that it is hard to have any regrets along the way. However, there were two pivotal moments in my career that could have really taken me down a different path.

About five years into the job I was really frustrated by the office environment. I wanted to run my own business, my way, and I wanted to run it remotely. I read the four hour work week by Tim Ferriss and started exploring small business that I could buy or start as a side project. I did a bunch of research and came up with a handful of ideas. I even created a website to get started. For better or worse, I was never able to pull the trigger. Instead, I went off to business school and elected to focus on my academics and personal interests over starting a business. In hindsight, it was the right decision, but the mental struggle was intense at the time.

The second pivotal moment was evaluating what I wanted to do out of business school. Permanently moving/working abroad had been a dream of mine for many years (I was going to run my business above abroad!). I went into my MBA with the express intent of securing a PE job in an international market. Unfortunately, I never really got the chance. I secured a full time offer before even starting my 2nd year of the MBA. Recruiting for a brand new geography, with no local deal experience, no connections, and nothing to differentiate myself seemed daunting. The market for PE jobs wasn't phenomenal at the time either. I elected to go with the bird in hand rather than risk graduating jobless.

What do you think has made you successful in your career? Are there any particularly interesting or unique challenges that you've faced along the way?

There are many different ways that a PE person can "add-value" beyond the base expectations. For me, I think the two things I do exceptionally well are (a) establishing relationships that are truly based on trust and a desire to work together, and (b) being smart, although not knowledgeable. It has frustrated me immensely the way that a lot of people in the industry treat others. Whether it is an investment banker hierarchy, PE hierarchy, dealing with third parties, you name it. When you're the client, it is very easy to mistreat a service provider as they are very likely to keep coming back for more. I have always made a very sincere effort to be respectful to everyone, be it subordinates, service providers, business owners, you name it. I have never tried to obfuscate information and even when negotiating against people, I advise them if they are misunderstanding a key point so that they aren't surprised and unhappy later. I view this as fundamental to good business to the point where former owners have asked me to sleep in their spare bedrooms, spend time with their families, or advise their children on career paths - well after our business relationships have ended.

In terms of (b), the majority of the people in PE know more than I do. They have a perfect mental map of all the key players in an industry, know who the key bankers are in each sector and which deals they worked on, and a plethora of other things that I just don't know. Combating this has been difficult, particularly as I've risen through the ranks and this sort of knowledge is utilized on a daily basis. Fortunately, I have been able to overcome it with "smarts" or "logic-based decisions." Logic, math, intuition, and probably a truckload of luck have really enabled me to make accurate predictions even if I fail to articulate the precise market dynamics amongst everyone in the supply chain. I know this sounds dumb - but identifying this as my competitive advantage and exploiting it as much as possible has been critical to my career progression.

Is there anything else you'd like to share?

Find balance. My job performance is at its peak not when I'm cranking away at night or on weekends trying to get a deal done. It is at its peak when I'm happy. For me, that means having the opportunity to pursue the extracurricular activities that interest me such as playing sports, reading books, and traveling. Fitness is also a key aspect. If you value your fitness, do everything you can to maintain it. I managed to fall into a rut immediately following my MBA and it hurt my mental state. A year later, I started aggressively exercising and was in the best shape of my life through my early 30s. It can be done and makes an immeasurable difference if this is something you derive happiness from. If you don't know what makes you happy, do some soul searching. Think about what you're really excited to do each week and focus in on that. You will thank yourself in the long run.

Comments (78)

 
Apr 11, 2020 - 5:16am

Thank you! Among all the valuable information that you shared here, I think that this piece is a truly great life advice.

CompBanker:

and enjoyed the freedom that comes with being able to make major life decisions on my own. Many people don't understand this, but I think it is paramount that one takes the time to understand oneself and pursue a life that fits their own mold and not others'.

Array

 
Apr 11, 2020 - 11:06am

Thanks for doing this, CompBanker . You were already a very experienced poster when I joined WSO, and I appreciate having the chance to learn from you.

I have about a thousand questions, but I'll start with a simple one. First off, I think you and I are very much aligned in how we treat our colleagues, whether we are the client to a third-party service provider, or we're across the table negotiating the deal, or guiding our junior employees. I also figure we're about the same age.

Given those, how do you like to establish your presence on a board? Do you quietly let your work speak for itself? Do you assert yourself early and often? I've always been the youngest guy on the board, and I'm categorically not a dick, so it usually takes me a while to "ramp up" to being a value-add board member after the deal is done. There are a lot of personalities in the room post-close and I find that can be hard to navigate.

Array
 
Apr 13, 2020 - 8:44am

Layne Staley:
Given those, how do you like to establish your presence on a board? Do you quietly let your work speak for itself? Do you assert yourself early and often? I've always been the youngest guy on the board, and I'm categorically not a dick, so it usually takes me a while to "ramp up" to being a value-add board member after the deal is done. There are a lot of personalities in the room post-close and I find that can be hard to navigate.
Happy to share my perspective here. If you arrive at your first board meeting and you don't already have a positive reputation and know the players in the room, you're behind. The absolute best time to establish your credibility is during the transaction process. This is your area of expertise and where you add the most value. Fortunately this should be a natural part of the deal process and shouldn't require any additional effort on your part. And if it isn't happening ... you should seek out additional responsibility during the diligence process to have direct dialogue with the management team. I don't care if it is simply walking them through the stock option plan, exposure is important.

I recognize this is not always possible. So what should you do in the event you're assigned to a company in the middle of the investment? This is an incredibly hard position to be in -- but you can still be impactful. There are a couple of approaches here:

1) This is more suitable for associates and lower level employees, but, use data! In a board environment, everyone else at the table has more experience than you do. Likely you have about 5-10 years experience compared to everyone else's 20+. As a result, your opinions based on "experience" or "gut" are going to be discounted by the rest of the board (even if you're spot on). The way to combat this is to contribute through data-driven analytics and decision making. Use the data to ask questions such as: "Our gross margins are down 5% in Product Category A, what is driving the demand? I seem to recall from diligence Product Category A uses a lot of steel, which has recently spiked. Do you think this is the main driver or are there other factors at play?" These comments progress the conversation forward, show you are prepared, and help build the respect of the board.

2) If you're a more senior professional, you will be expected to contribute in a much more strategic way and actually offer up direction and advice. This is much more challenging. Overall, if you're 10+ years into your career, you should be able to tap into your experience base to do so. But if whatever reason you're struggling, another strategy is to serve as a connector or as a prompt for other's expertise. An example which happened to me on a number of occasions: We bought a company and during diligence the idea of a merger with a competitor came up. Management rejected it because the two companies represented competing brands, one of which would need to be dropped that would create huge dis-synergies. For some reason the Partner always seemed to forget this conversation. When the topic came up in board meetings (literally every 6 months), I would jump in and reference the prior discussion with something along the lines of: "I believe we discussed this in the past and management's position was that it would create dis-synergies, making it an unrealistic option. Does it make sense to re-evaluate the opportunity today?" The answer to my question was obvious (absolutely not), but it enabled me to contribute to the conversation without actually having an independent thought of my own. By connecting comments made by those with more experience/respect to questions presented in board meetings, you can be seen as a meaningful contributor without risking being told you're "wrong" or that you lack experience.

3) This next one is the hardest, but you need to start developing independent if you're actually sitting on the board. This is an obvious statement, the hardest part is getting people to listen. I have found that you need to offer up a very compelling "why" alongside any opinion to justify the remark, even if people don't ask for it. Don't make comments such as "we should attempt to penetrate the southeast region" unless it is immediately followed by a compelling rationale based on sound logic and data. People may disagree with you, but if you've already stated your rationale, you're much less likely to get pushback because the naysayer must refute your rationale rather than simply disagree and state their own reason. It may sound dumb, but it makes a difference.

4) Finally, don't be the negative one on the board. Glass half full. It may be difficult if you actually have a negative outlook on a certain aspect of the business, but always try to compliment the team if you have an opportunity. It is typical for us to go around the table at the conclusion of each board meeting and have every board member say some sort of concluding comments. This is the right venue to compliment the teams efforts and speak towards the positive elements in the recent past or near future. Remember, if a board member doesn't like you, they can always just pick up the phone and call the Partner directly and cut you out. You want to give them a reason for you to be the first phone call.

Okay, my turn to ask you a question Layne Staley . I don't understand why you equate to not being a dick to requiring extra time to "ramp up" as a board member. I don't think the two are related at all -- and I'd even argue that you can be a more influential board member if you aren't a dick. So the question is, what did you mean by this comment? Thanks!

CompBanker

 
Apr 13, 2020 - 12:11pm

CompBanker:

Okay, my turn to ask you a question Layne Staley . I don't understand why you equate to not being a dick to requiring extra time to "ramp up" as a board member. I don't think the two are related at all -- and I'd even argue that you can be a more influential board member if you aren't a dick. So the question is, what did you mean by this comment? Thanks!

Thanks for the reply and for the thoughts. Very useful (and timely).

My comment was just a product of some prior experiences. I'm with you in that over time, I always figured that an honest contributor with meaningful insights and a humble personality will get respect from just about anyone. But it takes time.

On the flip side, I've seen boards that are like high school locker rooms. Backstabbing, infighting, gossiping, lying. The people who put their heads down and did good work seemed to get overwhelmed by the loud ones who elbowed their way into space. I thought that would be a ticket to an early exit, but I was shocked at how effective the manipulation seemed to be.

That's the genesis of my comment. I can't be that guy, even if I tried, and I don't really want to try. I'm glad to hear that your experience has been that establishing yourself early as the solid honest mature worker is a productive strategy.

Array
 
Apr 11, 2020 - 11:22am

Welcome back CompBanker and I'm glad to hear you continue to do so well. Growing up, you were the Non-Target MIS Undergrad (like me!) who broke into the prestigious, white-collar industry. Your posts were always so highly-refined and easily consumable for the general population. I think it's evident that you'd make an awesome lecturer / professor beyond your occupations in the private sector.

The one question I have is how much longer do you think you'll stay in FT PE? I remember you posting financials a few years back and it seemed like you were rounding the 5th inning in terms assets you would have liked to have accumulated. Perhaps the game is just now beginning because you're now punching at a higher weight with true movers and shakers in your industry? How much love do you got for the game?

 
Most Helpful
Apr 13, 2020 - 9:15am

dedline:
The one question I have is how much longer do you think you'll stay in FT PE? I remember you posting financials a few years back and it seemed like you were rounding the 5th inning in terms assets you would have liked to have accumulated. Perhaps the game is just now beginning because you're now punching at a higher weight with true movers and shakers in your industry? How much love do you got for the game?
Thank you for both the compliment and a pretty well tailored question. I assume you're alluding to the fact that I intend to retire once I have "hit my number" rather than attempting to maximize my wealth. Thoughts:

The question is a great one because it is one that I revisit on a regular basis. I wouldn't say that I'm mingling with the true movers and shakers of the PE industry, but I have definitely found myself in a far more influential position than I have ever been in the past. The best I can do is answer the question as I stand today recognizing that both I and the world are likely to change over the next 5 - 10 years.

I had a really incredible year in 2019 financially. It is both an amazing and uncomfortable feeling looking at your bank balance and literally seeing millions (unfortunately I hadn't paid taxes yet so I didn't get to keep it all)! While my colleagues were all used to it, it was a new to me and impacted me in a way that was probably unique. On the one hand, it was motivating -- that feeling of "holy crap all these years of working have finally paid off." Part of me got more greedy and wanted even more. On the other hand, part of me was demotivated, thinking: "is this really what I've been fighting for all these years?" I share this largely because this is an anonymous message board anyways.

For those that know me and my post history, I'm really not one for "stuff." I live a pretty inexpensive lifestyle outside of my real estate. I have always managed to survive just fine on my base salary. Despite this, I did what I imagine everyone else does when they receive a large chunk of cash: I went shopping (online). After hours of tearing through almost every department in Amazon, I literally managed to come up with nothing to buy. It was an enlightening moment for me and made me truly realize that the things I want the most in life and are actually hindered by working rather than enabled by working. I'm talking about things such as seeing family/friends, traveling, experiences, freedom/flexibility, more time.

So throw all of this into the mixer and what comes out? I've decided that I need to continue to de-emphasize earning as much money as possible and focus on checking other boxes in life. I've been doing this for a number of years, but the magnitude of the competing forces (earning money versus personal fulfillment) have shifted even more so. This has resulted in a number of pretty substantial life changes already, with more to come. I'm convinced that when my final days come and I'm telling the story of my life, I'll be happy I made this shift. Fingers crossed I'm right.

CompBanker

 
Apr 11, 2020 - 3:23pm

I'm so glad to see you back. Thanks for doing this.

CompBanker:
I think it is paramount that one takes the time to understand oneself and pursue a life that fits their own mold and not others'.

My first role after graduation was in a strong group people obsess over but one I felt unfulfilled in. I interrogated myself, wrestled with the disconnect between how I spent my time and how little happiness I had, and came to the same belief you have. It led me to zig where most people zag - I changed my career path dramatically.

It's rare to see somebody share a belief I hold so dearly. Few people seem to believe and live this, and anecdotally, most of them have chosen entrepreneurship in some way rather than the vertical climb.

Since you did choose the climb, what have been the hardest challenges in navigating interaction with people who think more dogmatically or fail to practice self-awareness the way you do?

For people who chose their own thing, it's just about never a dynamic of formal or titled power that creates a hiccup. It's always one of informal power (an LP declining a first-time fund, a venture capital partner declining a startup, a big fund declining a strategic partnership with a smaller domain expert manager), and it's easy to write that party off as simply being a bad fit and only one fish in the pond.

What do you do if you don't have that luxury because the people you're butting against have titled power over you in the firm? You spoke a bit about the challenge of office politics - how does this lens impact that?

CompBanker:
I view time as a precious resource and always try to allocate my time in a way that improves me. More specifically, I have a set of personal goals that span major categories including intellectual, physical, and skills-based. I try to balance out the three so that I don't get burned out from a single category or deteriorate to much in another!

Also loved this.

I am permanently behind on PMs, it's not personal.

 
Apr 13, 2020 - 10:47am

APAE:
Since you did choose the climb, what have been the hardest challenges in navigating interaction with people who think more dogmatically or fail to practice self-awareness the way you do?

For people who chose their own thing, it's just about never a dynamic of formal or titled power that creates a hiccup. It's always one of informal power (an LP declining a first-time fund, a venture capital partner declining a startup, a big fund declining a strategic partnership with a smaller domain expert manager), and it's easy to write that party off as simply being a bad fit and only one fish in the pond.

What do you do if you don't have that luxury because the people you're butting against have titled power over you in the firm? You spoke a bit about the challenge of office politics - how does this lens impact that?

Ugh. This is one of the more challenging questions I have ever been asked. The truth is that I still struggle in my interactions with more senior folks that have a fundamentally different approach to managing than I do. In fact, this is potentially the biggest issue I have faced as a "middle manager."

As we all develop in our careers, we establish our own management "style." Essentially, our own unique means of interacting with others and ultimately getting done what we need to get done in order to fulfill our responsibilities and be successful. Your style is likely to clash with others ... and it will clash a lot more than you think. This is why "fit" with an organization is SO important. Fit is fundamental in determining how frequently you're going to be aligned with your colleagues, or not. In terms of how to deal with this conflict, I don't have the right answer. I will share what I have done, which in some cases has even held me back or created professional risk. But please don't take this as the right way to go about things.

When I have a disagreement with a Partner over their approach, I only address it 50% of the time. It is critical to determine the personality of each one of your colleagues, including who is open to receiving feedback and who is going to slam the door shut in your face. If they are actually receptive, I usually do the following:

1) Offer to handle the communication myself, essentially doing it "my way." An example might be if the CEO is asking for a full bonus payment when they only earned 75%, and you and the Partner collectively decide that you aren't going to pay the full 100%. The Partner wants to tell the guy to go pound sand because he missed his objectives. You would much rather take a gentler approach, praising the CEOs accomplishments for that year but ultimately shooting down the bonus request on the basis of missing budget. In this scenario, I won't even tell the Partner "how" I plan on delivering the message, but just that I will deliver the message on my own and save them the time. For me, this strategy works best and also enhances my relationship with the management teams.

2) Make a recommendation, but cede that the Partner is the one who gets to make the ultimately decision and that you will execute and support whatever decision the Partner makes. I have found myself going down this path a lot over the last couple of years with Partners that are particularly dogmatic. I am sympathetic to the fact that if a "bad" decision is made and the results are unfavorable, the Partner is the one who is going to have to take the bulk of the responsibility for the outcome. In the spirit of "office politics," I think it is important to reiterate the fact that you stand 100% in support of the Partner's approach, even if it isn't the one you would have chosen. You don't want them suspecting that you're sabotaging their strategy.

3) And here comes the controversial and likely career limiting approach. It is not unusual for me to be told to ask for something inappropriate. It could be calling up a third party service provider and demanding a discount because they didn't fulfill the full scope of services. It could be telling an Associate to stay late to work on a presentation for a meeting the next day that we've known about for a month but just ignored until the last minute. Sometimes, in order to preserve my relationship with the person I am working with, I will side with them and apologize before delivering the message. While this approach usually wins the trust of the counterparty, it unfortunately does damage the Partner's relationship with them so I try not to do it unless I feel it is absolutely necessary. I only recommend doing this if your maintaining a strong working relationship is required to be able to successfully do your role.

Reading back through the above, I'm not even sure it is good advice. Perhaps you can work with it to mold your own means of working through these tough dynamics. Yikes.

CompBanker

 
Apr 13, 2020 - 10:06am

Phat:

You started managing analysts and associates in your 20's?
I don't think this is unusual really. Think about a direct promote Vice President in investment banking. While I believe things have changed from when I was in banking, it used to be ~3 years as an analyst and then ~3-4 years as an Associate and you're a Vice President, probably aged 28 managing both Analysts and Associates. Private Equity isn't really different .. 2 years banking, 2 years pre-MBA PE, 2 years MBA ... and again you're 28 managing Analysts and Associates.

CompBanker

 
Apr 13, 2020 - 11:20am

Hi CompBanker, it's good to see you here again. We'd been in touch in the past over messages. I was curious to get your view on what skills (soft and hard) are required to succeed at the senior associate and the VP level in PE?

separately, I find myself lacking in the negotiation department (credit agreements and so forth)...how does one become an effective negotiator?

What news sources do you usually follow to keep yourself up to date with upcoming or niche investment themes? I personally find that I sometimes get ideas from reading The Economist. Is there anything like that you follow?

Thanks!

Array
 
Apr 13, 2020 - 6:22pm

ibd-london:
Hi CompBanker, it's good to see you here again. We'd been in touch in the past over messages. I was curious to get your view on what skills (soft and hard) are required to succeed at the senior associate and the VP level in PE?
Thank you! Senior associate / VP skills, okay. I will offer up my personal perspective, but recognize that VP responsibilities are not the same at every PE firm and therefore what they look for is inconsistent.

Hard Skills
At the core, you're expected to have mastered the skillset of an associate by the time you become a SA or a VP. This is different for every private equity firm but there are some things that are quite common.

First of all, you need full command of modeling. Reviewing and correcting a model is impossibly time consuming if you don't fully appreciate how a model works. Even worse, if new things need to be implemented into the model for a specific deal, you're going to be in a really tough position to offer guidance to your associate if you aren't fully confident in it yourself. This includes all things related to accounting and the company's financial statements.

Due diligence also falls under the category. You're expected to be an expert in the due diligence process and start to actually direct efforts. This goes further than just delving into a dataroom and preparing presentations -- it comes down to developing a scope for third party providers and identifying areas that require investigation.

Lastly of the "hard skills" is written communication. You need to have developed very strong business writing skills. This includes more than just describing a business, an investment thesis, or the like. This includes outlining objectives for a meeting, a script for how to approach a call, or any other communication where you need to very clearly get your message across via email. By the time you're a SA or VP you're likely at least 4 years into the job and probably have an MBA as well. That's a lot of practice with written communication!

Soft Skills
These are MUCH harder to define as a SA/VP. Realistically, these are the most underdeveloped when someone is starting their role as a new VP. I think every firm's requirements would be unique, but as a baseline, you need to be able to pass the airport test and hold a conversation with anybody you meet. Doesn't matter if it is the CEO or Tony who drives the forklift in the warehouse, relating to all sorts of people is important. Beyond that, I would say that the remainder of the soft skills are expected to be refined over time rather than a requirement to be hired. Note that I'm not saying you can be deficient, just that you don't need to come in as an expert negotiator of phenomenal presenter.

Importantly, the rate in which you develop your soft skills will be a key factor in your success in the role and your promotion track. When the time comes to discuss your promotion, no one is going to sit around the table and say "ibd-london really knows his accounting, he will make a great principal!" That conversation is going to be focused on your effectiveness in areas such as (a) establishing a network/relationships, (b) successfully closing transactions, (c) driving good investment outcomes through portfolio company involvement, (d) ability to articulate yourself, and (e) a dozen other things that all fall within then soft skills category.

ibd-london:
separately, I find myself lacking in the negotiation department (credit agreements and so forth)...how does one become an effective negotiator?
That's a good question and I think it is probably a combination of a learned skill developed from each individual's personality. This is one area where my MBA actually helped a lot in terms of both learning the foundations of negotiation and getting practice.

At it's foundation, negotiating legal documents well typically requires a really solid understanding of the documents themselves. It may sound stupidly basic, but you really need to master the content of the documents if you want to be in a position to negotiate them. A lot of the points that get negotiated come up in every-single-deal and both sides are well versed in the common arguments that the other side is going to make. This makes negotiating 90+% of legal documents more painful than value-add.

I'd say true value-add negotiation comes from discussions directly with the business owners and bankers. In these cases, persuasion is really the key skill more than anything else. If you want to master your negotiation, start by being a very persuasive presenter. I have had the benefit of having mentors that were extremely effective in this area to help me develop personally.

Finally, before I ramble too much on the topic, you need to find your own style of negotiation. You need to be really comfortable and confident with your tactics, otherwise you're likely to panic and concede points prematurely. As sad as it sounds, my best recommendation is to simply observe other's tactics and adopt what works for you. I've seen really effective negotiators who like to "feign ignorance" and win through frustration. I've seen others who are just so stubborn that the other side eventually relents. I've seen the intimidation approach. My personal approach is to try to be rationale/logical and win the trust of my counterparty so that they trust me not to screw them even if they don't have 100% legal protection on all matters. (Note: I've never actually betrayed someone in this way ... it is just my way of attempting to win points). But overall, you need to find what works for you.

ibd-london:
What news sources do you usually follow to keep yourself up to date with upcoming or niche investment themes? I personally find that I sometimes get ideas from reading The Economist. Is there anything like that you follow?
This might sound crazy, but I don't really follow any news sources in particular. From time to time I'll read what interests me in the Wall Street Journal or BBC News. I also agree a good economist article as well. But realistically, my news sources exist for me to be informed personally rather than professionally. This obvious helps immensely with professional conversations (dinners, events, and what not), but I don't use it as a source of knowledge for investing purposes.

CompBanker

 
Apr 13, 2020 - 7:25pm

Thanks for taking the time to answer questions. Have found this post extremely helpful. Couldn't help but follow up here, what sources of knowledge do you go to for investing purposes?

Also interested to know: how is your fund navigating the pandemic we're experiencing? is your team actively pursuing opportunities that might have come down in valuations, or going pencils down for the time being?

 
Apr 13, 2020 - 11:48am

Appreciate the posts CompBanker - fellow non-target chiming in. I like to number things so there is some order to my thoughts so bear with me here.

1.) How did you initially deal with some of the more prestige-oriented firms and individuals coming from a non-target school? Did the MBA solve this?

2.) Despite your success, you seem to be a guy that works to live rather than live to work. With that said, you've chose not to get married/start a family. Do you see yourself changing your mind on this anytime soon? This is coming from someone who has a family and is grappling with chasing my career goals, wherever state or country they take me, and being considerate towards my significant other/kid.

3.) Your path has been, as you said, "standard". Do you think you're risk-averse? Have you missed out on opportunities due to your pursuit of the "standard" path?

4.) I know you alluded to considering starting your own business... as someone who thinks about that every day, can you expand on how you went about researching and planning to be an entrepreneur? Can you expand on why you chose not to go that route?

Thanks, ppl like you are why I keep coming back to WSO.

Array
 
Apr 14, 2020 - 5:03am

BobTheBaker:

Appreciate the posts CompBanker - fellow non-target chiming in. I like to number things so there is some order to my thoughts so bear with me here.

1.) How did you initially deal with some of the more prestige-oriented firms and individuals coming from a non-target school? Did the MBA solve this?

It's funny, I have never heard the term non-target used outside of WSO ever in my entire career. This is simply not a thing. If people were thinking it in their heads, they never vocalized it. That said, I do feel strongly that my MBA and GMAT have resolved any perceived shortcomings in my capability. My MBA does come up from time-to-time in conversation, but mostly because I'm frequently encountering Booth alums in the industry. To this day I still advise people who potentially underperformed in undergrad or who went to lesser known schools to attempt to get an MBA from a top program. I personally think it makes a difference even if you can't quite definitively capture how.

BobTheBaker:
2.) Despite your success, you seem to be a guy that works to live rather than live to work. With that said, you've chose not to get married/start a family. Do you see yourself changing your mind on this anytime soon? This is coming from someone who has a family and is grappling with chasing my career goals, wherever state or country they take me, and being considerate towards my significant other/kid.
This really comes down to personal preference. My advice to you would be to talk to your significant other about it. Have a very sincere conversation. The decision should be a joint one. But no matter what, don't just assume the answer is "no" without having the conversation.

Random anecdote which is just a single data point: Someone very close to me moved thousands of miles away with his wife to further his career. Turned out to be a fantastic decision which really bought them both closer together as they had to rely on each other without an existing support system in their new city.

BobTheBaker:
3.) Your path has been, as you said, "standard". Do you think you're risk-averse? Have you missed out on opportunities due to your pursuit of the "standard" path?
I am the absolute opposite of risk-averse. I would actually say I'm far more risk-seeking than risk-averse. The reason I have gone down the "standard" path is because it is actually a very attractive one. I like to think that if better opportunities were available I would have taken them, but for the most part I have been successful aligning my career with my personal objectives. The only exception would be that I would love to be able to work remotely and travel ... but that's not honestly a realistic expectation when paired with PE.

BobTheBaker:
4.) I know you alluded to considering starting your own business... as someone who thinks about that every day, can you expand on how you went about researching and planning to be an entrepreneur? Can you expand on why you chose not to go that route?
I don't want to oversell my entrepreneurial pursuits. The majority of my activity was fleshing out ideas, talking to friends and family for feedback, researching any potential liability / risks, identifying if there was a small business doing something similar that I could potentially by and run myself ... these sorts of things. Really nothing groundbreaking that would be useful to folks that have been seriously considering entrepreneurship. For me, the struggle was more of a mental one. I weighed very heavily the cost/benefit of continuing in Private Equity versus establishing a lifestyle business which generated $100k - $200k a year and enabled me to work remote / travel, I was attempting to project how happy I would be in either scenario versus the likelihood of accomplishing either.

In the end, I obviously elected to stay in PE. For me, a huge consideration is the fact that entrepreneurship will always still be available to me. Almost all of us in PE have the luxury of quitting our jobs whenever we would like to attempt to start a business. Put differently: I wasn't prepared to permanently close the door on PE at that stage of my life.

CompBanker

 
Apr 13, 2020 - 1:49pm

This is incredible, thanks for doing this. Your answers to Stanley on managing boards and to APAE on interacting with superiors in title who differ from your approach are topics I'm always thinking about and this is some really, really helpful insight. I also had a couple other topics come to mind.

1) Do you think that you would have ended up at a firm with as good of a culture fit for you if you had not attended business school (via direct promote, lateral)? If not business school, what are the other factors that contributed to you ending up at a firm that was a great fit for you? What were the most important questions you asked firms before deciding you had found the right long term fit for you? I'm a long ways behind you, but I feel like my mindset towards this industry and my goals are pretty similar to yours (non-target school, humbler beginnings than my peers, not chasing prestige or top dollar / importance of work-life balance, generally try to treat everyone respectfully rather than my more sharp-elbowed peers, etc.), and I think I may have struck out on the finding the right fit long-term in my first associate gig. I'm considering a direct VP promote offer at what would appear from the outside to be a decently strong firm (MM size, good returns, quickly growing fund sizes, etc), but I think there are other options out there where I could be much happier, and I'm trying to figure out if it's a bad move to turn down the VP promote and go the bschool route to hopefully get looks from many more firms without a guarantee to get back into the industry (particularly if I don't get into H/S).

  1. Since being in PE I've learned how difficult it is to get deals through investment committee. Identifying a good deal is a skill, but you can't execute on that skill if you can't get the "good deal" through committee. If you can share, what are the best ways that you, or others trying to make the jump up past the VP level that you've seen, have been able to drive a deal through committee, get everyone comfortable with the deal, and / or convince your team that you have a good angle. Do you always bring executives / board members to the table? Deep research on the industry / business to the point where you can convince your team to pay market clearing price without an "edge"? Proprietary sourcing to buy at below market price? After reaching VP, it appears to me that advancing further / eventually to partner is based on your ability to get a deal through committee and have the deal do well. Aside from the "basics" at the VP level (successfully navigating / negotiating third parties, driving diligence, being a good board member, etc.), was there anything else I'm not thinking about that you attribute your continued promotions to?

  2. Coming from a non-target, who do you bounce ideas off of when making pivotal career decisions as you have advanced in your career and how did you create those relationships (if it was a process that you think someone could replicate)? Without a network of friends, family, or classmates who are older than me in the industry outside of my own firm, this hasn't come easy, and I don't want to rely on people at my firm who have a bias of course.

 
Apr 14, 2020 - 6:14am

JoeyJ:
1) Do you think that you would have ended up at a firm with as good of a culture fit for you if you had not attended business school (via direct promote, lateral)? If not business school, what are the other factors that contributed to you ending up at a firm that was a great fit for you? What were the most important questions you asked firms before deciding you had found the right long term fit for you? I'm a long ways behind you, but I feel like my mindset towards this industry and my goals are pretty similar to yours (non-target school, humbler beginnings than my peers, not chasing prestige or top dollar / importance of work-life balance, generally try to treat everyone respectfully rather than my more sharp-elbowed peers, etc.), and I think I may have struck out on the finding the right fit long-term in my first associate gig. I'm considering a direct VP promote offer at what would appear from the outside to be a decently strong firm (MM size, good returns, quickly growing fund sizes, etc), but I think there are other options out there where I could be much happier, and I'm trying to figure out if it's a bad move to turn down the VP promote and go the bschool route to hopefully get looks from many more firms without a guarantee to get back into the industry (particularly if I don't get into H/S).
Yikes. I don't think business school really had much to do with it OTHER than the fact that business school helped me to better mature and understand what I personally value. I then could apply my updated understanding of myself to my job search. That said, and folks may disagree with this, but to a large extent you're going to have to get lucky. It is almost impossible to determine the culture of a firm to the level required when going through the interview process. There are way too many nuances that are just not apparent on the surface -- and each Partner at the firm is going to have their own unique personality. That doesn't mean you shouldn't try, but I don't think it is realistic to hold out for the perfect firm. More importantly, unlike investment banking, almost no one in my MBA had multiple PE offers. PE recruiting is not done on a structured basis where everyone recruits simultaneously. Your dream firm may not be recruiting until May when you're sitting there in March with an exploding offer at your backup. So what do you do? Almost everyone I know would take the offer in hand...

So what can you do to at least improve your odds? I think this is where being a good judge of character is super important. Pay very close attention during your interviews to the behavior of the interviewer. How do they refer to their team? Do they use the word "we" to describe decisions, or does the individual try to claim credit for group activities? Do they refer to junior folks by name or do they just say "the associate on the deal did XYZ?" Do they compliment folks who are not in the room? I have found there to be a billion different personality indicators that can be parsed out of an individual's word choice alone. It isn't perfect, but usually the personality aligns with the word choice pretty well.

On top of this, take advantage of resources available to you once you get the job offer. Go on LinkedIn and find FORMER employees. Reach out to them ... ask to speak. Ask them tough questions. Even if you are already 100% sure you're going to accept the offer, getting the perspective of a former employee can be super helpful in setting your own expectations.

Again, the short answer is that you really will never know for certain and the perfect fit probably doesn't even exist. You have to make the call yourself. But you can absolutely arm yourself with data points to make a more informed decision if you're lucky enough to be able to make the decision.

JoeyJ:
2. Since being in PE I've learned how difficult it is to get deals through investment committee. Identifying a good deal is a skill, but you can't execute on that skill if you can't get the "good deal" through committee. If you can share, what are the best ways that you, or others trying to make the jump up past the VP level that you've seen, have been able to drive a deal through committee, get everyone comfortable with the deal, and / or convince your team that you have a good angle. Do you always bring executives / board members to the table? Deep research on the industry / business to the point where you can convince your team to pay market clearing price without an "edge"? Proprietary sourcing to buy at below market price? After reaching VP, it appears to me that advancing further / eventually to partner is based on your ability to get a deal through committee and have the deal do well. Aside from the "basics" at the VP level (successfully navigating / negotiating third parties, driving diligence, being a good board member, etc.), was there anything else I'm not thinking about that you attribute your continued promotions to?
Another tough one. In one of my follow-up comments above, I spoke about persuasion. This is one of the most underdeveloped skill in junior employees that is crucial for success as you move up the ranks. When pitching the investment committee, I think there are a handful of things that you need to do / consider:

a) Know the data cold. Duh, this isn't something you don't already know. Nothing makes the investment committee more uncomfortable than having them ask a question and you not knowing the answer when the information is readily available. Alternatively, them identifying a major risk that you missed will call into question all the work you've done, even if you've done a great job on 99.99% of everything else.

b) How you say it is as important as the data itself. This was confusing to me as an investment banking analyst as early in my PE career. The facts and deal characteristics alone will not secure investment committee approval. Lot's junior folks deliver pitches in monotone and provide WAY more detail than the investment committee cares about. This causes people to zone out and miss the important points. You need to learn to use voice inflection to emphasize key points.

c) Know the firm's deal history. Almost every investment professional has been burned before. If you start describing company characteristics that are similar to a failed investment, you're going to lose support. Be careful you don't fall into this trap. Know which deals were failures and which ones were home-runs. Connect the characteristics of your prospective investment to past successes. "This situation is reminiscent of what we encountered with HugeReturnDealA where the company has great leverage over it's suppliers." These sorts of comments can really sway how the investment committee thinks through particular risks.

d) Positioning. This is the core of point C above. You need a glass half full approach. If you aren't super enthusiastic and pounding the table for the deal, no one else is going to stick their neck out to do so. While I don't personally agree with it, I've seen partners frequently downplay risks or even not reveal the fact that they disagree with a pretty substantial addback in order to get something through committee. An example might be if you called up three executives you know in the industry and two of them thought the deal was bad and one loved it. Rather than providing all three insights, they just choose the one who offered a positive opinion. This almost falls into the category of office politics. Too much honesty and you will really struggle to get a deal through committee.

e) All the things you mentioned. Pretty much everyone in PE wants to have an edge of their competition. If you have a unique angle on a deal, exploit it. Sounds like you already know how to do this -- definitely keep doing it.

JoeyJ:
3. Coming from a non-target, who do you bounce ideas off of when making pivotal decisions as you have advanced in your career and how did you create those relationships (if it was a process that you think someone could replicate)? Without a network of friends, family, or classmates who are older than me in the industry outside of my own firm, this hasn't come easy, and I don't want to rely on people at my firm who have a bias of course.
Maybe this will come as a surprise, but pretty much nobody with industry experience. I have a very close friend who knows nothing about the industry but knows me really well. She and I talk things through from a life perspective rather than a professional one. I also discuss major life decisions with my parents out of respect more than anything else. They have really valuable perspectives but they see the world through a much different lens than I do (they are far more risk averse). From a professional prospective I have more or less paved my own path through a combination of introspection and observing the world around me.

It is a bit of a tangent, but I have always been cautious about advice (oh the irony as this entire thread is my giving advice). One always needs to pay attention to the source of advice and recognize that the advice giver's values and interests are unlikely to align with your own. The best example I can give is in regards to food. Everyone has their own unique tastes. I dislike sushi -- it's just not for me. When friends tell me how I "just have to try XYZ sushi place" I usually just laugh because I already know I'm going to hate it. The advice really doesn't apply to me because it is based on their personal preferences.

So how do you actually benefit from advice? To me, advice provides two functions. First, advice can contain data/facts that apply equally to everyone. For example, if your friend tells you: "Don't buy that home, it doesn't get any natural sunlight!" This advice is useful, even if you don't agree with it. As someone who wants minimal natural sunlight in my bedroom to help me sleep, I'll discard the advice but take the data/facts to arrive at my own conclusion. Second, advice can help advance your own thinking on a situation. In the scenario above, I may never have even considered the amount of natural sunlight as an important criteria when evaluating buying a home. So the advice is quite useful in the context of spurring independent thought.

I encourage everyone to view advice through this lens when reading the comments here on WSO. When it comes to personal decisions, it is rare that I'll actually ever tell someone what decision to make unless I think it is an absolute no brainer. My advice tends to focus on identifying the factors that one should consider prior to making their own decision.

CompBanker

 
Apr 13, 2020 - 2:39pm

Hi Compbanker,

I particularly appreciate the comment on finding the beat of your own drum and molding your career around that thought process. It's been something I've been working on for the past half year (and even more so now we are in lockdown...).

I've been visiting WSO (anonymously) since the beginning, and its been instrumental in helping me break into IB and beyond. Like you, I'm a single guy (early 30s for me), constantly seeking self improvement in all areas areas of life (intellectually, athletically, and in my career).

As a VP (and secretly checking WSO, if only the analysts saw me on here...), I'm contemplating what the next step will be. I have two questions, if you could provide a bit of perspective.

  1. You mentioned testing the entrepreneurship waters during your MBA and the mental struggle at that time. Can you walk us through your thought and decision making process to arrive at the "no"? And how does a career in PE fit your personal mold?

  2. How do you determine fit in an interview at the mid-manager level?

  3. When you do eventually settle down, how do you approach seeking a long-term partner?

Thank you.

Array
 
Apr 14, 2020 - 6:56am

dontbugme:
1. You mentioned testing the entrepreneurship waters during your MBA and the mental struggle at that time. Can you walk us through your thought and decision making process to arrive at the "no"? And how does a career in PE fit your personal mold?
After you posted this, I answered the question above. I'm copying the same text here so you don't have to scroll up and find it:

Compbanker:
I don't want to oversell my entrepreneurial pursuits. The majority of my activity was fleshing out ideas, talking to friends and family for feedback, researching any potential liability / risks, identifying if there was a small business doing something similar that I could potentially by and run myself ... these sorts of things. Really nothing groundbreaking that would be useful to folks that have been seriously considering entrepreneurship. For me, the struggle was more of a mental one. I weighed very heavily the cost/benefit of continuing in Private Equity versus establishing a lifestyle business which generated $100k - $200k a year and enabled me to work remote / travel, I was attempting to project how happy I would be in either scenario versus the likelihood of accomplishing either.

In the end, I obviously elected to stay in PE. For me, a huge consideration is the fact that entrepreneurship will always still be available to me. Almost all of us in PE have the luxury of quitting our jobs whenever we would like to attempt to start a business. Put differently: I wasn't prepared to permanently close the door on PE at that stage of my life.

dontbugme:
2. How do you determine fit in an interview at the mid-manager level?

This is incredibly difficult. The best way? Hire back your pre-MBAs who left to go get their MBA. This is one of the reasons this path is so common -- it is the easiest way to know what you're getting.

On top of that, a lot of the advice I gave to JoeyJ above regarding assessing cultural fit from the perspective of the candidate applies in reverse when the firm is interviewing. Essentially, pay attention to the precise word choice of the candidate and how they describe their experiences. Also make sure to call each one of their references and dig as deep as you think is appropriate.

On top of that, there are two other really strong indicators from my perspective. One is how the candidate spends their personal time. For example, are they introverted? Do most of their activities require group participation (such as sports, board games, group travel experiences, etc.) or are they mostly solo efforts (reading, running, etc.)? Use this information to guide some of your interview questions to try to develop an accurate picture of the candidate. Then assess whether or not someone with those characteristics would be successful in your organization.

Second, definitely require interaction with the candidate in a social setting. Generally dinner, drinks, or inviting them to an event with multiple people from your company (this isn't as weird when it is a senior level hire). It is very easy for someone to "fake it" in an interview setting, but it becomes substantially more difficult over casual conversation during dinner or drinks. You generally won't be able to learn everything about the candidate, but major red flags can frequently surface in this environment.

Even if you perfectly execute all of these, assessing fit in an interview is very challenging. Expect that you will make mistakes and that people will behave different over time as they assimilate into the organization.

dontbugme:
3. When you do eventually settle down, how do you approach seeking a long-term partner?
I don't necessarily agree with the concept of "eventually settling down." For me, that isn't the objective. I am not actively seeking a long-term partner nor is it necessarily something I feel I must do in order to be fulfilled in life. I'm not opposed to it, but it certainly isn't a requirement. As a result, I'm not really in a position to answer this question as I don't really have one an approach.

The one thing I will say is that you should anticipate that you will continue to change as a human as you grow older, both personally and professionally. The things you care about now are likely not going to be important to you later in life. Keep this in mind when choosing a partner. I think it is more important to share a fundamental outlook on life with your partner than have them fit a specific mold or set of characteristics. Things such as: (1) Are they easy going? (2) Are they comfortable being in uncomfortable situations and how do they react? (3) Are they introverted or extroverted? To me, these sorts of characteristics the most important in determining long term compatibility.

P.S. Don't take dating advice from a single guy on an anonymous online message board :)

CompBanker

 
  • Associate 3 in PE - LBOs
Apr 14, 2020 - 6:38am

Hey CompBanker so great to see you here. You were very helpful when I was starting out my analyst gig in 2012. I had been about to get fired by my BB due to bad performance But your advice and kind words had helped me pull through. I have a couple of questions for you.

1) first is about business school. From my research, PE mostly seems to be filled with kids from either Harvard or Wharton at the top most level. I know rest of the schools in m7 are great too but I would like to know a bit more if you don't mind how had going to a school like Booth been helpful to you in terms of opening doors? If you could be somewhat specific, that would be great.

2) I am at Kellogg for my mba. I have a couple of years of experience in IB and a few years of operating experience at a privately held family business. I am going to be interning as a senior associate at a relatively known PE firm this summer. I have been a part of financial and legal due diligence work streams in the past (during my time in IB but more as a "coordinator") and can talk high level (read: bull shit) about what needs to be done but have never conducted it myself or mapped out the scope myself. Any advice on how can I prepare for this? In my interviews, I said I have experience but I don't at all...I find commercial due diligence easier and don't foresee any problems with that.

Thank you so much!!!

 
Apr 14, 2020 - 8:50am

Associate 3 in PE - LBOs:
1) first is about business school. From my research, PE mostly seems to be filled with kids from either Harvard or Wharton at the top most level. I know rest of the schools in m7 are great too but I would like to know a bit more if you don't mind how had going to a school like Booth been helpful to you in terms of opening doors? If you could be somewhat specific, that would be great.
While there are certainly loads of HBS / Wharton alum in private equity, I have found that there are plenty of Kellogg / Booth folks as well. I think it really depends on geography more than anything else. If you want your alumni network to be effective, I think you need to focus your efforts most heavily on recruiting for PE in Chicago. If you don't want to be in Chicago there are definitely alum in other cities, but this is just the largest concentration (as you might expect) and the market in which the Kellogg name will carry the most weight.

My personal experience was rather unique. I came into my MBA with four years of PE experience and a really solid idea of what I was looking for in a future firm. As a result, I didn't go through the system like many of my classmates. That said, I did reach out to select alumni to get access to markets in which I didn't have any credibility. For example, an alum doing PE in South America actually set me up with a connection / friend of his that was a Partner in a South American PE fund. Interestingly, I had met the Booth alum when I visited the school for my interview and we had loosely stayed in touch. The connection resulted in a summer internship opportunity that I didn't ultimately end up pursuing for reasons that had nothing to do with the role. The point is that my direct outreach to an alumni asking for help in that specific market actually resulted in a job opportunity. Nothing special, but standard networking.

Not sure this will be useful to you in your search, but I also had a relatively large MM PE fund reach out to me during my first year asking me to interview for a summer position. Apparently one of the professors (whose class I never even took) had recommended me and a few other classmates to the fund. I ended up meeting with one of their professionals but we both decided that there wasn't a fit. I didn't realize it at the time, but some of the professors at the university have pretty good connections to the local PE firms. Might not be a bad place to look if you have taken any PE or M&A courses.

These sorts of benefits from connections have persisted post-graduation as well. I frequently come across alums professionally that are either (a) investment bankers, (b) executives, (c) competitors, (d) lenders, and a whole bunch of other relevant parties. With something so easily identifiable in common, these relationships tend to always start off positive.

Associate 3 in PE - LBOs:
2) I am at Kellogg for my mba. I have a couple of years of experience in IB and a few years of operating experience at a privately held family business. I am going to be interning as a senior associate at a relatively known PE firm this summer. I have been a part of financial and legal due diligence work streams in the past (during my time in IB but more as a "coordinator") and can talk high level (read: bull shit) about what needs to be done but have never conducted it myself or mapped out the scope myself. Any advice on how can I prepare for this? In my interviews, I said I have experience but I don't at all...I find commercial due diligence easier and don't foresee any problems with that.
I admit, this one caught me off guard. So basically you lied about having experience to get the job and now you're being put to the test? Yikes...

I'm assuming by saying that you've never "conducted it" yourself you mean that you've never led the workstream. The first one is easy ... legal due diligence requires almost no effort from you. The lawyers know exactly what they are doing and will do pretty much everything themselves. The important thing is that you are able to identify to them exceptions to the norm that are unique to that particular invest opportunity. Maybe there is a significant product liability risk that you want to better understand. Maybe they have really critical IP that you want the lawyers to investigate any potential past infringements. Basically, you need to tell the lawyers the what to specifically focus on OUTSIDE the normal scope of activities.

Financial due diligence. This starts with the quality of earnings. This one is tougher because it depends on the company. The initial draft of the scope will be provided by the accounting firm. My best advice would be to get your hands on scopes from past deals that your company worked on. Take 5-6 of them and see if there are things that they all have in common. Make sure those are in the new scope. Then go through all of the unique scope items and try to make a judgment call on whether or not that analysis is pertinent for your current opportunity. If it is, add it to the scope. If not, move on. That should get you far enough along to save face if you miss anything important.

Beyond the quality of earnings, the rest of the financial due diligence can be done in a similar manner. You'll need to study presentations from past deals. See what analyses were shown to the investment committee. Replica those analyses in your own diligence. This strategy should be effective in getting you through the summer and is a good starting point for anyone who is just beginning their PE job with no idea what to do. Either way ... goodluck!

CompBanker

 
  • Associate 3 in PE - LBOs
Apr 17, 2020 - 12:49am

Hey CompBanker thank you very much.
Re-financial due diligence, I have a follow up. Unfortunately I don't have any such materials from my past deals. But what do you mean by scope? I understand QoE is a big part of it, and so is understanding debt and working capital level. For these, I'm guessing you have to understand how they recognize revenue vs cash coming in... capitalization of costs... look at historical WC trends and adequate level... understand sources of funding and whether instruments exhibit debt or equity like characteristics... look at financial & operating leases. That's what I can think of right now. What else would there be to financial DD? If you would be so kind as to illustrate your point with an example, that'd be very helpful! Thanks again

 
Apr 14, 2020 - 2:28pm

I have been following your content for years, thanks for sharing.

How did you choose your MBA program? How well has it prepared you for where you are?

How do you feel your market knowledge has changed over the years and in what ways have you matured as a PE professional in terms of deal experience?

Are there things aspiring PE associates should be focusing on before deciding on PE which you also wish you knew earlier?

With a background where you expressed interest into entrepreneurship have you explored becoming an independent financial sponsor or establishing a search fund?

 
Apr 15, 2020 - 6:42am

FinanceBrah:
How did you choose your MBA program? How well has it prepared you for where you are?
I only applied to a few programs as I did most of my filtering pre-application, and I assumed I could just apply to others in Round 2 if necessary. Funny enough, the reasons Booth ended up being a near perfect fit for me weren't ones I considered when applying to my MBA. I'll explain:

For many people, your MBA ends up being your lifelong professional network. The reasons here are pretty obvious so I won't go into them. On top of this, your MBA friends similarly continue to be important in your life for decades post-MBA. It isn't that surprising. In my particular circumstances, most of my high school friends took very different paths than I did and we no longer have much in common as our interests have completely diverged. That's fine and is a normal part of life. The MBA brings together people that have a pretty common set of priorities in life -- namely they are very accomplished, intelligent, career-oriented people who are typically very open to new experiences. This creates a foundation to establish new friendships that will last.

Why is this important? Each school has its own culture, not dissimilar to the culture at a company. At Booth, the culture embraces your stereotypical midwestern values. Friendly, helpful, family-oriented, etc. What was so fascinating to me is that despite the school attracting people from all over the world, the students seemed to adopt the school's culture as opposed to the other way around. Quite possibly it is very effective screening on the part of admissions, but why it occurs doesn't really matter. The key is that I wholeheartedly enjoy interacting with my classmates and the alums that I encounter in life. I like doing business with these people. I like hanging out with these people. I like pontificating on the economic impact of world events with these people (yes, we're nerdy).

Having aligned values with your classmates is important because this is your defacto professional and personal "group" for the rest of your life, should you choose to use it. Had I attended a school where my values were not aligned with the culture, I cannot say I would have gotten nearly as much out of the experience. I'll be honest, all things equal, I would have taken Wharton over Booth had I been given the choice ~8 years ago. Looking back, I am super glad that things went the way they did because I'm not sure I would have been a good fit for Wharton, culture wise. That's not to say that everyone should choose Booth over Wharton - just that it was a better fit for me.

As a side note, I do like to think that I practice what I preach. I have advised very talented, capable individuals to take Wharton or HBS over Booth if I felt it was the right decision for them. While I am happy to promote the school, I strongly believe that it would be incredibly selfish of me to give a bad recommendation to someone in order to blindly promote my alma mater.

FinanceBrah:
How do you feel your market knowledge has changed over the years and in what ways have you matured as a PE professional in terms of deal experience?
It is hard to precisely identify how my market knowledge has changed. The process is very holistic. I made a post once years ago that I think captures the deal and market knowledge maturation process, which I'll repost here:

CompBanker:
In my experience, you can never really start out by seeing the bigger picture. You have to learn the pieces by focusing on each one literally one by one as you go through a process. The more processes (experience) you gain, the more pieces you understand until ultimately you can "see the bigger picture." This is a bit nebulous, so I'll explain it in M&A / Deal terms.

The first time an analyst goes through a deal, they know almost nothing. They end up spending the majority of their time learning / perfecting a financial model, organizing data, formatting, or completing a task. They learn how to do these things, but they miss out on all the other parts of the deal because they are overwhelmed.

The second time through, the analyst knows the model and the process. This frees up mental capacity to pay attention elsewhere, or perhaps even see ahead on potential issues. This either enables the analyst to step up and do new tasks the analyst hasn't done before, or frees up mindshare to continue to learn from parts of the transaction ignore before. Maybe now the analyst is able to sit in on Purchase Agreement negotiations and therefore starts to learn about basic legal terms.

The third time through, the analyst comes into the deal with a whole bunch of puzzle pieces already figured out. The analyst takes a bigger role in coaching the CFO through the process, knowing what to ask for ahead of time, and establishing credibility / leadership. During Purchase Agreement negotiations, the analyst knows the terminlogy fluently, and can start to see how the various sections of the agreement interact. They can translate legal language to financial expression, perhaps taking the lead on preparing the working capital definition and schedule,.

Each iteration through, an individual can broaden their knowledge because they've mastered the other areas. All the details become second nature over time and the individual develops the ability to see ahead on the majority of potential pitfalls. Eventually, they are able to focus exclusively on "seeing the bigger picture" and contributing at a higher level because they aren't spending all their time learning.

This is one of the reasons why experience is so valuable and also impossible to replicate with pure intellect alone. Knowledge, capability, instinct all help you get up the learning curve much faster, but some degree of repetitions is required in order to be really effective. This applies not only to banking, but the majority of jobs / life activities.


Expanding on the above, I think I have done enough deals to very quickly sort through the "noise" and reach a conclusion, even in a completely new industry or business model. The market and deal process has an overwhelming amount of information that needs to be processed and sifting through it can be challenging if you don't know what to look for. Experience has really taught me just that: What do I look for and how do I find it? Perhaps this is a silly answer, but I think this is a pretty critical skill that just can't be taught. Some will learn it faster than others, but it requires experience to get there.

Outside of deals, there is a lot going on with firm administration that has a meaningful impact on the investment side of the business. Things such as investment periods, specific LP relationships (and side letter agreements), capital availability, calculation of returns, individual track records, taxes, and endless other considerations. These factors can be the difference in deciding whether to make an investment or not, to take a deal fee, etc. Most employees don't have a strong appreciation of these inner-working which can leave them scratching their heads when a Partner makes a decision that feels illogical. Learning about these dynamics has enabled me to be more successful in my role overall.

FinanceBrah:
Are there things aspiring PE associates should be focusing on before deciding on PE which you also wish you knew earlier?
I think the number one thing that I did not appreciate when looking for my first PE job was how easy it is to get pigeonholed into an industry. While I don't think it occurs at the investment banking analyst level (although it certainly begins there), one can very rapidly find themselves getting a lot more traction at PE firms investing in the same sector that the banker worked in. By the time you finish your pre-MBA years at the PE firm, your options can be even more restricted. I strongly encourage anyone looking to break into PE to start with a sector or industry that they are passionate in (if any) to focus there first. It sounds foolish, but this will be an important consideration throughout your career and is very difficult to reverse the more experienced you get.

FinanceBrah:
With a background where you expressed interest into entrepreneurship have you explored becoming an independent financial sponsor or establishing a search fund?
The reasons that entrepreneurship appeal to me do not align well with being an independent financial sponsor or a search fund. For me, entrepreneurship is about having control of not only your day-to-day but also your geography and work schedule. In my opinion, in order to be a successful independent financial sponsor you pretty much need to operate exactly like a traditional PE fund. To me, this doesn't bestow the benefits I sought but introduces a new degree of risk.

CompBanker

 
Apr 21, 2020 - 8:11pm

You are a good Human for doing this, thank you!

As it happens, I am also in PE and a lot of what you say resonates with my worldview, goals and career trajectory so your opinion is meaningful.

One point you mostly omitted (perhaps intentionally?) in the discussion of firm politics and your management style was the role of mentors for you.

How did you go about identifying and cultivating mentor relationships in your firm / market? Or were there simply scant opportunities?

I have found there can be a lower correlation between the good managers who are proactive about being a mentor and their pull within the firm... how did you manage the tension between investing in the relationship for itself or for what it can get you?

"well thank god your feelings aren't a fucking priority here"
 
Apr 23, 2020 - 5:25am

Wags_Wagner:
One point you mostly omitted (perhaps intentionally?) in the discussion of firm politics and your management style was the role of mentors for you.

How did you go about identifying and cultivating mentor relationships in your firm / market? Or were there simply scant opportunities?

I have found there can be a lower correlation between the good managers who are proactive about being a mentor and their pull within the firm... how did you manage the tension between investing in the relationship for itself or for what it can get you?


Thank you for the kind words and I'm glad you have found my contributions helpful. In regards to mentors, I touched on this topic in response to JoeyJ's question above about bouncing ideas off of others.

The short version is that I have never really had a mentor in the traditional sense. There is no one professionally that I bounce ideas off of, consult for career guidance, or anything remotely of that nature. For those major life decisions, I usually discuss them with my parents and a close friend who knows nothing about finance. Even then, usually I am telling them what my decision is rather than advice seeking, although there have been a couple instances where I have modified my behavior to ensure my parents didn't lose their minds (notably, not taking a PE job in South America haha).

I have pretty radically different values and interests than most people I have encountered in PE. This generally translates to the fact that others' advice is misaligned with maximizing my own happiness, so I tend to follow my own heart rather than the counseling of more experienced individuals. Some examples:

(1) Money is important to a degree, but not something I really value. Other than living in a nicer apartment, my lifestyle has not changed over the last ten years. My net worth would be more than double what it is now had I not forfeit a ton of unvested carried interest in pursuit of finding the right organizational fit.
(2) Integrity is critical. I know that EVERYONE says this, but I have seen so little of it in the industry. Sure, when times are great it is easy for everyone to be honest and treat others with respect. But as soon as money is on the line, someone needs to take ownership of poor performance, or a deadline is approaching -- people revert to their core behavioral patterns. I have definitely learned that seeing how people behave when their back is against the wall is a true test of character.
(3) Life outside of work needs to be balanced. This is more than just having activities outside of work that you enjoy, or spending time with friends and family. I need to live where I want to live. Never have I pursued a job in New York City as I don't personally find living there appealing. I know this has limited my options career wise but it is not something I was ever willing to compromise. I have taken pay cuts and even a demotion in order to change cities and live where I choose.

Pulling myself back on track here, the other form of mentor is a colleague who helps navigate the day-to-day office politics and complexities of the work environment. Similar to my "big picture" approach, I have not had a mentor except for a short period early in my career. More details:

For a couple of years, I worked with someone who was truly fantastic about providing mentorship. He would constantly invite me into his office to silently listen in to conversations I otherwise would not have the opportunity to hear. His knowledge was insane -- one of the most talented folks I ever worked with in my career. He invested very heavily into educating me on the inner workings of private equity, purchase agreement negotiation, due diligence, and most importantly, communication and persuasion tactics. This really built my foundation early in my career and helped enable me to individually navigate more complex situations as I encountered them along the way.

Beyond that individual, my development has been driven by observation rather than teaching. Investment banking and PE exposes you to all types of personalities. Growing through the ranks I have been very fortunate to have worked closely with individuals that have differing strengths and weaknesses. My approach has been to select my "favorite" styles from each of these individuals and mold them into a style that suits me personally. This is my overall approach to the day-to-day.

Additionally, I have assembled an array of different tactical approaches to all sorts of problems that I can tap into depending on the situation. An example would be negotiating a working capital target. Pretty straightforward. My default approach is always to use logic/math to determine and defend my position. However, this approach falls short when dealing with emotional or irrational counterparties. In these cases, I go into my arsenal of experience and determine if I want to change my behavior to (1) play the ignorant card and just claim the opposing point of view doesn't make sense until I frustrate them and they cave, (2) play the stubborn approach and indicate that this is a critical deal item for my team and we absolutely can't cave, (3) use it as a bargaining card and seek to extract value elsewhere in exchange, or (4) play aggressive and accuse the other person of retrading the deal and not upholding their commitments. I have negotiated against or alongside all four of these approaches (among others) on multiple occasions. This is a very tangible way of seeing the value of experience.

CompBanker

 
Apr 23, 2020 - 10:06pm

So now that you have fallen for the trap of responding to a post about the benefits of mentorship / guidance from those who have gone before... I have more questions.

You demonstrate a somewhat enviable knowledge of what you want out of your life. When did your conviction solidify?

Another very viable course for you would have been to front-load your earnings in your 20s to maximize optionality in your 30s (particularly if you knew a low COL environment was attractive down the line).

Your alternative gambit of securing a desired long-term / future state now (living where you want, working in a more qualitatively attractive place, etc.) seems to have worked out quite well for you, but it sounds like you never did get to have that international adventure...

How sure were you when you made that fundamental trade-off call? Or do you plan to leave the game and try the adventures in your later 30s? If so, ballpark "number" first?

Hope the questions are not too presumptuous about your motivations.

Sidenote: your comments about IC persuasion are a bullseye... many people assume Partners are very rational, logical and disciplined sages but in reality they are prone to making decisions on a few data points, anecdotes, gut and emotion / enthusiasm.

"well thank god your feelings aren't a fucking priority here"
 
Apr 26, 2020 - 7:57pm

I have two questions:

1)Do you consider yourself being very good with people/high EQ?

2) How much does coming from a LMM/MM fund pre-MBA hurt your chances of getting a decent post-MBA? In your opinion, is it worth leaving a solid banking job to go to a LMM PE fund?

 
Apr 27, 2020 - 2:37am

mjbanker:
1)Do you consider yourself being very good with people/high EQ?

Trying to be objective, I would say that I score high in terms of charisma. The way I like to think about it is that everyone has their own unique way of relating to others and interacting. My "personal angle" if you will is that I am pretty good at reading people. This usually enables me to tweak my communication style to better establish rapport with the other person. I also tend to be very open/honest which enables me to build trust quickly.

This may sound strange, but this pertains strictly to my professional interactions. I don't tend to adjust my communication style when it comes to personal matters. That's way too mentally exhausting and I'd rather just be strictly me around friends and family.

mjbanker:
2) How much does coming from a LMM/MM fund pre-MBA hurt your chances of getting a decent post-MBA? In your opinion, is it worth leaving a solid banking job to go to a LMM PE fund?

Before I answer the question, I just want to point out that the way you phrased this question implies that a LMM PE fund is not a "decent post-MBA." I am FAR from a PC person, but I do think you'd elicit a better response to your question if you phrased it something along the lines of: "How does working for a LMM/MM fund pre-MBA impact your ability to get a job at a larger fund after your MBA?

I would say that early in your career, it is easier to move to a smaller fund than a larger one. I have seen moves in both directions but I do think large-to-small is more common. I would say that there are a number of factors driving this, but I'll mention a few clear drivers that immediately come to mind. First, there are simply far more MM funds than large funds out there. Second, folks who work at the larger funds seem to have better academic credentials in general, so the MM funds can get comfortable with hiring someone without direct experience on the basis of their other credentials. Third, the large funds like the large banks are very structured, so you generally know what you're going to get in terms of someone's training and work experience. The MM/LMM operate in a less structured way so there are more unknown variables there.

All of that said, I would advise you to evaluate where in the PE market you want to participate and pursue those opportunities. There are some very good threads on this website discussing the differences among the different market segments: MF / MM / LMM. It is very easy for people on this website, particularly those early in their careers, to gravitate towards the MFs on the basis that MFs pay more on average. As someone in their 20s who is very career oriented, maximizing earnings is generally the goal. As you progress into your 30s and definitely into your 40s, priorities often shift dramatically and you start to care a lot more about lifestyle, family/friends, hobbies, whether you like your colleagues, whether you enjoy what you do for a living, etc.

By the time you hit this point it is often too difficult to switch market segments. As someone who works in the LMM, it is very unlikely I would hire anyone that worked at a MF or UMM fund beyond the pre-MBA level. Their experience is simply too different to the point of needing to completely re-train them and there are plenty of available candidates with direct MM/LMM experience. Heck, I've seen bulge-bracket analysts really struggle to adapt to the LMM given the differences. Similarly, I would be absolutely lost at a MF at this stage in my career.

Note that the intent of this post isn't to scare anyone or steer them in one direction or another. Just as I advise above to give careful thought about which industries you invest in to avoid getting pigeonholed, I think it is equally important to consider which market segment is the best fit before it becomes too challenging to change course.

CompBanker

 
Apr 27, 2020 - 2:48pm

Super insightful thread. Thank you for doing this. My questions below are reflective of my situation but hopefully will also be helpful for others:

  1. If coming from an non-traditional background (F500 corp strategy, corp dev, etc), how have you seen others position themselves to recruit into PE? And does my approach below make sense?

    My approach has been: 1) MBA, 2) leveraging industry experience (so looking at funds who
    are in my industry / focus there ), and 3) practicing model building / IC memo write-ups and
    when possible, reaching out to industry contacts to help validate theses and build a
    network.

  2. How do you think about different types of fund vehicles? Do you think longer-term vehicles generate value? For example: your typical fund that invests on a 5-7 year cycle v. a fund that takes a much longer timeline (e.g. Cranemere).

  3. How do you approach professional development for your associates / senior associates?

Thanks for doing this again!

 
Apr 27, 2020 - 4:34pm

Great White Short:
1. If coming from an non-traditional background (F500 corp strategy, corp dev, etc), how have you seen others position themselves to recruit into PE? And does my approach below make sense?
My approach has been:
1) MBA,
2) leveraging industry experience (so looking at funds who are in my industry / focus there ), and
3) practicing model building / IC memo write-ups and when possible, reaching out to industry contacts to help validate theses and build a network.
I don't have a lot of experience in this area. I've seen a few business school friends successfully make the transition and they did exactly what you described. Essentially, MBA, leverage their particular industry experience to make up for the fact they had no deal experience, and practice like crazy. I think this is the way to go. Can't promise it will get you there, but I think it will give you the best shot possible.

Great White Short:
2. How do you think about different types of fund vehicles? Do you think longer-term vehicles generate value? For example: your typical fund that invests on a 5-7 year cycle v. a fund that takes a much longer timeline (e.g. Cranemere).

I'm not familiar with Cranemere and have only encountered PE funds with a longer term hold period on a few occasions. I've heard the pitch in terms of how it is good for the company, but it is really hard for me to assess without actually gaining exposure myself. From the perspective of the company, I think it sounds great. From the perspective of the employee of the PE fund, it depends. On the positive side, longer holds generally mean higher RoIC, but lower IRR, which equates to more carry for the same amount invested. However, it could also mean you're juggling a ton more portfolio companies at once, or that you're not raising funds as often, which can result in fewer carry dollars. I suppose the devil is in the details here, so hard for me to say.
Great White Short:
3. How do you approach professional development for your associates / senior associates?
Can you be a little bit more specific into what you're looking for feedback on here? It is a broad topic and there are a number of different ways I could take this -- so clarity would be great!

CompBanker

 
Apr 27, 2020 - 7:20pm

Appreciate your thoughts on the first two questions and interesting point on the RoIC v. IRR dynamic for longer-term funds.

CompBanker:
Can you be a little bit more specific into what you're looking for feedback on here? It is a broad topic and there are a number of different ways I could take this -- so clarity would be great!

Absolutely. You talked above about what it takes from a hard and soft skill perspective to get to the next level. You also talked about influential people in your career that you observed and learned from along the way.

Now that you are starting to be in that position to mentor, what's your leadership / mentorship style for associates and senior associates? (e.g. carve out specific aspects of the deal process for them to own and run, etc)

 
Apr 28, 2020 - 3:32pm

Hey CompBanker

Thanks for doing this and welcome back. Just a few questions:

1) How has the Covid-19 situation affected your firm's investment mandate so far and what are some of the best practices that you have been advising your portfolio companies who have less than 3 years runway/cash at this moment ?
2) What is the best prep Financial Modelling / Leverage Buyout Modelling resource for new kids on the block like me who still wants to break into private equity ? Any personal recommendations ?
3) Any good Private Equity books or reads to recommend that you have come across in recent years ?
4) What is your opinion of CFA for a career in private equity ? Is it a must to have in the finance industry these days?

 
Apr 29, 2020 - 5:09am

aspharagus:
1) How has the Covid-19 situation affected your firm's investment mandate so far and what are some of the best practices that you have been advising your portfolio companies who have less than 3 years runway/cash at this moment ?
Less than three years runway / cash!?! If any private equity firm is operating with three years of cash cushion to fund operations in this environment, they have been operating with an insanely conservative capital structure! Companies in distress typically work with what is called a 13-week cash flow. This is a very detailed analysis of cash inflows/outflows on a weekly basis that identifies whether the company is going to run out of cash. The analysis is refreshed very frequently and if cash is in danger of running out, steps are taken such as not paying accounts payable, laying off or furloughing employees, and things of that nature.

Investment mandate itself hasn't changed, but there are very few companies coming to market in this environment and most existing processes have been put on hold. Some deals do continue to get done though.

aspharagus:
2) What is the best prep Financial Modelling / Leverage Buyout Modelling resource for new kids on the block like me who still wants to break into private equity ? Any personal recommendations ?
Oh man, I don't even know exactly what is available in the market these days. I learned financial modeling in my "free time" while working as a banking analyst. I essentially took a template model, deleted it, and rebuilt it from scratch. I then deleted it and rebuilt it again, and again, and again ... until I had completely mastered all the elements. It may feel like a stupid exercise but it really made all of the concepts "stick" and positioned me to do well in my private equity interviews. Cost: $0.00 + one weekend.

aspharagus:
3) Any good Private Equity books or reads to recommend that you have come across in recent years ?
I don't really read any finance books. I have been living and breathing finance for more than the last decade, so they aren't very high on my list when it comes to reading material. If you're looking for books that will improve your ability to perform on the job, I'd say pick up a few books on memory (Moonwalking with Einstein is one of my favorites) or human behavior (such as Nudge).

aspharagus:
4) What is your opinion of CFA for a career in private equity?
From the perspective of securing a job, I would say that it is a minor benefit in that it demonstrates ability to master financial concepts and dedication to the industry. From the perspective of being able to better perform on the job, I have encountered very few scenarios through my entire career where the CFA was beneficial (I have a couple colleagues with the CFA charter).

CompBanker

 
  • Business School in PE - LBOs
Apr 30, 2020 - 4:08am

What's your advice from someone going from assoc to VP? It's a big jump in responsibility. Where have you seen people fail? For many it's the first time actually leading work streams and thinking up analyses etc vs mainly doing what you're told.

 
Apr 30, 2020 - 6:41am

Business School in PE - LBOs:
What's your advice from someone going from assoc to VP? It's a big jump in responsibility. Where have you seen people fail? For many it's the first time actually leading work streams and thinking up analyses etc vs mainly doing what you're told.

This is a pretty broad question. My feedback here is far from comprehensive, but I'll focus on managing more junior professionals as that is the biggest "change" in responsibilities:

1) Control the urge to complain, and definitely NEVER complain downwards. You set a really bad example when you complain to your analyst or associate. Fostering this kind of culture is hard to reverse and creates a negative environment. Complain to your spouse, your parents, or your friend who doesn't know anything about PE, but not to colleagues.

2) Do not compare associates and analysts to their peers. You risk creating jealousy, showing favoritism, or anything else of that nature if you do so. If Johnny is struggling to figure out a model, never say: "Bobby was able to build it in an hour, you've had three hours and it still isn't done!" A much better approach is to promote collaboration with peers through feedback such as: "Bobby has built a lot of models and is quite familiar with these nuance, consider asking him for guidance next time you're in this situation."

3) Offer praise when praise is earned, and sometimes when it is not. Example: You're about to walk into investment committee and Johnny has done a superb job putting together the materials. Compliment him in front of the IC. Furthermore, definitely offer up (sincere) praise in front of third parties. Example when sitting down to a portfolio company board meeting after a new associate joined the team: "Johnny just joined our firm as a replacement to Bobby, who left to go to business school. You'll soon find that he is a master with an excel spreadsheet and has put in a tremendous effort to get up to speed on the business. Welcome Johnny to the Acme Products, Inc. team."

4) Provide negative feedback privately. This one is kind of obvious, but a lot of people fail to abide by it in the heat of the moment. If your associate or analyst messes up, don't provide that feedback in the middle of the meeting. They know they've messed up and they are probably more upset about it than you are. Chastising them in the middle of a meeting is poor form and reflects negatively upon you. Wait an hour. And when you do provide negative feedback, don't just identify the problem. "Your presentation skills are terrible" is NOT good feedback. "Your responses to the IC's questions are too lengthy, try to lead with the answer and a key supporting fact, then let the IC follow-up if they aren't satisfied with the response."

5) If you notice negative habits or trends are forming, address them and don't let them fester. You NEVER want to go into an annual review with someone and surprise them with negative feedback. They should know it is coming because you've discussed it throughout the year. Example: "Johnny, the team gets really frustrated when we walk by your office and you have your door closed, we want to promote a more open and collaborative office environment." To which Johnny responds: "I had no idea this was a problem, I really wish you had told me before." In this scenario, YOU are the one who ends up looking stupid.

6) Don't be afraid to delegate. Failure to delegate is going to limit your own capacity and potential. You must come to grips with the fact that you're no longer an associate. The associate type responsibilities need to be done by others. Sure, you can step in and help from time to time, but do so sparingly. Always doing your associates' work will limit their own professional development as well as your own.

I could go on all day about the challenges of managing people for the first time, but these are some of the bigger categories for newly minted VPs.

CompBanker

 
May 3, 2020 - 6:58pm

Thanks for this. Really good post and one I'll definitely keep in mind, particularly on #1 (I know this is a huge personal flaw of mine where I just need to bitch and get it out of my system - should probably internalize it a lot more though).

Any advice on getting better at trusting the work of people below you? Especially now with coronavirus and WFH, I've struggled more and more with the "I'd rather just do it myself" dilemma.

Like when it's already midnight and I get something back that looks like poop and is riddled with errors, I'd rather not spend 15 minutes going through to identify all the problems, sending it back to the analyst, having them send it back an hour later with not all issues fixed, then going through more comments. Would rather just take whatever is sent and fix everything in like 30 minutes, or even just have done it all myself correctly the first time.

What I've been trying to do when things are in such time crunches like that is I'll just turn all the comments myself and then try to write down all the issues and then review them with people later when there's a better time, but then I find that a lot of people either don't care as much or don't hold themselves to as high of a standard (like how fucking hard is it to spellcheck every document) and they end up repeating a lot of the same mistakes.

What I don't want to do is create a banking-esque culture, where you basically force things to be right until they are right (but in a way there is a reason that trial by fire type learning experience is so effective). Like I want to be a constructive mentor and really help people learn in a way that doesn't come across as being too harsh or strict, but my team is so incredibly lean and we've been perpetually understaffed that I haven't been able to dedicate the time that I want to in order to do so. Further exacerbating this issue is some of our hires are fresh out of college analysts, not people who already have a lot of best practices and preexisting knowledge from their IB stints.

 
Apr 30, 2020 - 3:31pm

Whiskey5:
Great read. CB, on more than just a few occasions, mentored me throughout my PE search process. And throughout our conversations, I'm glad to call CB a friend.

CB was the last person I spoke to before making the decision to join my current firm about 5 years ago. No comments except to say thanks for all the advice!


Appreciate the kind words. Five years, really? Wow...

CompBanker

 
Apr 30, 2020 - 8:40pm

Thanks so much for doing this. Just read through this entire thread and it provided me with a ton of helpful info. I'm a college senior heading into IB, and am planning on recruiting on-cycle for PE. Fund culture seems like a black box, and I know it's common to contact past associates to get a better read on it. What do you think are good questions to ask in an interview to get a better feel on culture and what are some red flags I should look out for during the process?

 
May 1, 2020 - 6:01am

Pandax:
Fund culture seems like a black box, and I know it's common to contact past associates to get a better read on it. What do you think are good questions to ask in an interview to get a better feel on culture?

Consider asking them about:
1) Specific people. "I have had a lot of interaction with Johnny, but I haven't yet met Bobby. Anything you can share from working with him? His style, quirks, etc.?"
2) Open ended advice. "What advice would you give a new analyst/associate joining the firm? Any pitfalls that I should be cautious of?"
3) Clarify mixed messaging. "I'm trying to get a better understanding of the role. I'm really excited for the opportunity to participate in board meetings, but I've also heard that associates don't always get to go. What was your experience?"
4) If you end up developing good rapport by the end of the call, feel free to ask them why they left. Don't push this one though...
Pandax:
What are some red flags I should look out for during the process?
It is very rare to find someone trashing a former employer, even if they had a poor experience. Because of this, you really need to be on the lookout. Do they dodge questions by saying things such as: "I haven't worked there in a number of years, so I really can't comment on the culture." If they worked there for any reasonable period of time, they are going to have an opinion. If they really liked the people they worked with, they'll proactively tell you. If you have to claw it out of the person, expect that the experience was negative.

Note that if the person is in good standing with the firm and has maintained a relationship, expect that they will shoot a very short email to their former colleague saying something along the lines of: "FYI -- John Smith rang me to ask about Acme Capital. All good, just letting you know."

CompBanker

 
May 2, 2020 - 4:19am

Wags_Wagner:

Your alternative gambit of securing a desired long-term / future state now (living where you want, working in a more qualitatively attractive place, etc.) seems to have worked out quite well for you, but it sounds like you never did get to have that international adventure...
How sure were you when you made that fundamental trade-off call? Or do you plan to leave the game and try the adventures in your later 30s? If so, ballpark "number" first?

So you asked the magic question Wags_Wagner . And the answer is: I recently made what was probably the most difficult professional decision of my career. I left my job and moved to London to build/reestablish my career in Europe. Giving up mountains of unvested carry was hard. Stepping back professionally when right on the edge of becoming a partner was unsettling. Throwing all this away and risking my career to start over in an environment where I need to reestablish my reputation, my network, and my knowledge was absolute madness.

Follow your dreams. I hate when people give that advice without having to experience the sacrifice of giving up a 'sure thing.' The idea of golden handcuffs is real. It is so hard to walk away from nearly guaranteed millions. To take an irreversible step of forfeiting what they have worked for more than a decade to build. This is not a decision that should be made until you have spent an extraordinary amount of time exploring who you are and what makes you happy.

I have encountered so many people that have led such interesting lives. One friend and his wife quit their corporate jobs in their 20s and traveled the world for years. Another climbed the ranks in his company by transferring continents every couple of years. I love Patrick + AndyLouis stories which are both fascinating. As I reflected on where my own life was headed, I tried to imagine what my own story would be. I realized that I would not feel fulfilled if my story were: "I graduated and took a PE job in my home city and stayed there investing in the same sector for the next 20 years until retirement. The end."

For many years I justified that no PE firm in Europe would hire me. I cemented in my head that it wasn't worth the effort without placing a single phone call. Then one day I concluded that I didn't want to reach the end of my career and regret never having tried. I booked a trip, reached out to the one business school friend I had in the industry, and blindly cold emailed PE firms days before I arrived. I was shocked at how receptive everyone was – my cold email hit rate was nearly 50% securing in person meetings and every single person I reached out to responded within 24 hours. I was both incredibly excited and incredibly mad at myself for not having done it sooner.

Fast forward to today. It is way too early to know whether I made the right decision, but I am happy to have given myself the chance. I look forward to writing the follow-up piece and sharing my story one day.

CompBanker

 
May 4, 2020 - 8:41pm

Good man, thanks for following up!

Kudos to your titanium testicles. Golden 'cuffs are seductive in any context.

Mind if I toss you a private note? You are hitting pretty close to home on a lot I have going on right now, would like to bounce some ideas off of you that contain some potentially identifying info.

"well thank god your feelings aren't a fucking priority here"
 
May 3, 2020 - 5:23am

Hey Compbanker

Thanks for answering my previous questions.

Just two additional generic questions I have:

1) What do you look for in an investment / What are the top things you look for in an investment ?
2) What makes a good or bad investment ?

Would like to hear your thoughts / opinions on these during your experience in Private Equity.

Thanks for doing this AMA by the way.

 
May 3, 2020 - 11:28am

aspharagus:
1) What do you look for in an investment / What are the top things you look for in an investment ?
2) What makes a good or bad investment ?

These are unfortunately WAY too broad to even scratch the surface! I did go back and find a old thread where I posted about how I go about reviewing CIMs (in 2012). I re-read my answer from eight years ago and I think it is a pretty fair answer (although I probably put more emphasis on industry now than previously). Here is the link to the thread: How to Analyze a CIM

Here is the language from the post:

Compbanker:
I've been screening CIMs for a number of years now and the truth is that everyone has their own personal style. I prefer to review them at night or over the weekend when I can have a period of uninterrupted reading. I usually start by doing a 30 second flip through the financials to get a high level impression on size, margins, growth, and most importantly, ability to generate free cash flow. Then I go to the beginning of the book and just start reading.

Unlike the posters above, I find the most important thing to identify is competitive differentiation -- essentially what will enable this business to continue growing and win market share from competitors. I try to determine the value add that the company's products or services provide to the customer base and any barriers to entry - this helps me understand the company's margins both historically and through the projected period. I need to figure out the buying criteria, aka whether the company is competing on price, service quality, or some other metric. Finally, industry plays a very important role, primarily because it dictates the base rate that I can expect the company to grow at over the next five years.

Once I figure out the above, I'm usually in a pretty decent position to make a call on whether I like the deal. There are obviously other things that come into play (recurring revenue, customer concentration, cyclicality, etc), but usually these things can all be determined based on the business model anyways.

CompBanker

 
May 3, 2020 - 10:37am

Thanks for doing this!

I am finishing up in banking in a coverage group and will be transitioning over to an UMM fund at the end of the summer. Frankly, a lot of my work over the past 2 years has been on pitches / coverage accounts, and I'm a bit insecure about my ability to perform at the caliber of other people in my incoming class. Do you have any tips on things to focus on / ways to improve in the coming months?

Array
 
May 3, 2020 - 11:20am

AKR12313:
I am finishing up in banking in a coverage group and will be transitioning over to an UMM fund at the end of the summer. Frankly, a lot of my work over the past 2 years has been on pitches / coverage accounts, and I'm a bit insecure about my ability to perform at the caliber of other people in my incoming class. Do you have any tips on things to focus on / ways to improve in the coming months?
Don't be insecure. While you might be behind some of your other folks in your incoming class, the difference won't be as noticeable. If biggest determining factor of performance is going to be your individual capability (a combination of work ethic, memory, capacity to learn, etc.) ... things that are not taught on the job. Sure, deal experience would be optimal, but a lot of what an analyst brings to the table from banking is work ethic and organizational skills, things you develop even if you're only working on pitches. So basically, don't sweat it, you'll be fine.

CompBanker

 
May 3, 2020 - 4:02pm

In context of your investment history thus far, what key takeaways do you have from your your best and worst investment that have shapped your investment philosophy and/or process. As a bonus, would love to hear the backstory of each. Apperciate you creating this thread, high quality content

 
May 7, 2020 - 4:42pm

skyline_77:
In context of your investment history thus far, what key takeaways do you have from your best and worst investment that have shaped your investment philosophy and/or process. As a bonus, would love to hear the backstory of each. Appreciate you creating this thread, high quality content

Unfortunately sharing these stories requires the disclosure of confidential information.

More generally, I would say that you should never make an investment you don't believe in. There can be a lot of pressure to make an investment. It could be deploying capital at the start of a new fund, deploying capital before the investment window closes, you haven't done a deal in a long time, whatever. Resist the urge -- the cost of dealing with a bad investment is infinitely worse than any of the repercussions of not doing the deal.

CompBanker

 
May 7, 2020 - 7:03am

CompBanker

Read this thread from start to end. I really appreciate you taking the time to explain some of these ideas/concepts/questions that I am sure so many of us have. This is far and away the most insightful thread I have read from this forum. You describe everything in such amazing, easy-to-digest detail. I wish I could could grab a coffee with you and pick your brains - would you mind if I shoot you a DM? Thanks again for this, you and it are both amazing.

Array
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