There and Back Again - A Banker's Tale

Some unique insight into the buyside vs. sellside and the hunt for eternal glory. I've had an interesting few years that has led to experience on both sides of the table. Given the uniqueness of my story, I wanted to share it with the WSO Community. I left a top MM bank after A3 for a top MM PE ($1.5B+) gig, then left the established PE shop to join a newly formed fund with a niche focus on an industry that I am passionate about, then left there to come back to the MM bank that I originally left from. This is the story of that journey. As always, I would be happy to answer any questions.

Motifs to Keep in Mind

1) I cannot stress enough the importance of fit in terms of establishing momentum and building on success in your career. Establishing a tight, cohesive team of colleagues can create significant operating leverage for sourcing and executing deals. You naturally gravitate toward how to complement each other and establish strong efficiencies that are atypical in finance, especially investment banking and private equtiy.

2) The grass is not always greener - people (including myself) are often eager to move on to something bigger and better based on perceptions rather than reality (because you haven't lived it).

3) The buyside does not necessarily have more "power" or "pull" when compared to banks. You would be surprised how much time and effort PE shops spend on relationship development with banks, including "tipping" through co-advisory roles where no work is required. They want to ensure they are kept in the deal flow for the best opportunities that drive returns. Just because you are the "money" at the table, doesn't mean you have access to the assets to put that money to work. PE firms also need debt capital to supercharge equity returns - which they get from banks.

4) Risk adjusted compensation is higher in IB than PE – fewer outliers but more reliable, steady wealth creation over time.

“It’s a dangerous world out there, and if you don’t kick your feet, there’s no telling where you might be swept off to”

The Fellowship of the Ring (Working Your Ass Off Just To Lose All Your Friends in The End)

I did three years as an analyst at a top MM firm - worked like a dog and ramped up nicely over my three years. I had the privilege of working with a top group and developed a bit of expertise working exclusively with two MDs. As I progressed through my analyst stent, I was able to establish trust with my team and take on significantly more responsibility than is typically assigned to analysts - which I found extremely rewarding. I was compensated very fairly, and my firm is notorious for treating people the right way - there is a stated "no asshole" policy. While I was an analyst, direct promotions to Associate had not been established at my bank - you had to go get an MBA (which they would pay for) and come back. I had no interest in that, so I decided to pursue PE and landed a gig at a reputable firm with a $1.5B+ fund that has been around for over 50 years.

The Two Towers (of Private Equity)

I had a great experience in private equity, closing four deals in my first year and being the top comped Associate in my class. However, I discovered that the structure at my shop was very rigid - which gave me angst given I was accustomed to working up the chain in banking. Roles and responsibilities were pretty defined, and Associates were really treated as analysts - lowest guy in the stack. Despite the firm treating Associates well, there was no long-term opportunity (do 2-3 years then out). So, I decided to pursue an opportunity where I could have more vertical flexibility, opportunity to move up and take on more responsibility. At the end of my first year, I decided to leave and go to a "start-up" PE fund with an industry specialized merchant banking firm that was transitioning to private equity.

This move was a great learning experience, as I was running entire deals by myself (smaller deals ~$5m EBITDA), but still executing. There was also huge upside in terms of carry and co-investment opportunities in deals closed - but the base pay was way less. I was managing diligence, running the lender process, meeting with the CEOs and other top leaders of targets and spending weeks at a time performing on-site diligence and single-handily drafting investment committee presentations. At the end of the day, there was too much risk in terms of my compensation structure and if the entrepreneur owner managing partner decided not to do a deal, all of my work was for nothing. The risk was a bit too much for me, and I was starting to think about moving on. Serendipitously, my prior MM banking firm gave me a call one evening... this was a little over two years after I left - "Name, are you ready to come back?" Indeed, I was.

The Return of The King (really a prince at best)

I came back as an experienced Associate and hit the ground running - my group has continued to gain tremendous momentum and build the long track record of successful M&A outcomes in the niche that I had become so passionate about (same niche as my smaller PE role). Given my prior experience with the group, I hit the ground running from an execution standpoint and it was great to have support at the analyst level. My MDs have also expressed significant gratitude for my return, and I have established a strong personal brand in my group and in our investment banking division overall.

I've been back for a year now, and I am incredibly happy with my decision. We are absolutely crushed from a work perspective, but the group of guys I work with are all awesome - we have a ton of fun, even at 3am when we are all still grinding. Given the strong fit and established rapport, I have formed a strong trust with my MDs and have taken on even more responsibility - they allow me to run with as much rope as I can take and manage. This environment allows me to be proactive and consistently pursue professional development, which is something I did not experience in a larger, rigid PE firm. The grind is paying off, and I have been given the nod for VP promotion at the end of the year. Not bad for a kid from a state school.

Epilogue

Overall, the work you do in PE and IB is very similar - PowerPoint presentations, modeling, industry research, managing diligence / third-parties, etc. - just applied to opposite ends of the transactions. From a pay perspective, the risk weighted return in IB is much higher than PE. You are unlikely to be that outlier partner that is worth $100m+, but there is a clear path to progressing your career and wealth creation while still performing exciting (at least to me) work and working in an environment that you love and can prosper in.

Always respect the grind - she's a beautiful and rewarding enchantress that will always be there for you (even at 3am).