Things you can do for a PE firm
I read the FAQ section and also browsed the web to find a bit more about the different roles people play in a PE firm. it seems generally there are 3 main functions in a PE firm.
1) find deals/source things
2) do financials/run numbers on current companies
3) operational mgmt of current companies.
Any thoughts on this list, is there more or less? do people play multiple roles? Do all firms specialize as so?
I have an opportunity to work in a business development/sourcing role in a PE firm, what are thoughts about this from you guys? Could really use your help.
I would say most important: raise money
At the junior levels I would imagine sourcing would involve a lot of cold calling. I'm not sure if they just plop a list of names and numbers for you to call and just put your head down and pound the phone for 10 hrs a day or whether you're going to be researching companies on your own and coming up with your own investment ideas, but being comfortable on the phone is an important skill to have for sure. It's nice if you can actually build a relationship with a potential target acquisition, however if you're calling and getting screened out and sent straight to voicemail it's frustrating. It teaches you persistence.
If you really want to make the best of your experience there you should be able to pull off sourcing, analyzing, structuring and exiting a deal. That is something that not a lot of analysts get to take part in and it's definitely something that would be impressive talking about, either in a job interview or in convincing management in future buyouts, etc.
At some smaller firms sourcing/BD will be handled by the same people who are doing execution.
The role will probably involve a lot of traveling for conferences, trade shows, etc. in addition to relationship management with bankers, lawyers, accountants, etc. that can provide deal flow. I'm sure there is a marketing aspect to it as well.
Re: 1 - finding deals/sourcing is a broad thing. Setting up and going to meetings w angels, vcs, growth stage companies, business brokers, investment bankers, conferences, researching industry journals for ideas, maintaining relations w/ these people, knowing how to get all this shit organized... its a lot.
2 - Running numbers... so this is clearly a very broad thing as well. You gotta know what numbers to run. This can be done by researching comparable companies, precedent transactions, being aware of insider trading if applicable, doing dcf's and researching what might influence growth. You may get a company youre working on that specializes in pharmaceuticals, and might for instance have a couple of products that are being produced as well as others that are in phase 3 testing or are awaiting fda approval, and making valuations of such things that arent on the market can be very tricky/lead to great growth potential/risk potential if you dont understand the underlying science. Thus, doing interviews of experts in the field, in both the industry specific areas (doctors, researchers, insurance reimbursement directors etc) might be necessary to come to a proper understanding of what the likelihood of a product coming to market/being viable is. Market and product research is at least as important as the other things youve mentioned.
Operational management... ya, this can be significant as well, especially if your portfolio companies dont meet numbers or require restructuring. It depends heavily on the deal. If youre getting in on a distressed play or something this can be extended hugely.
Youre not really describing the firm, its strategy/investment criteria, industry focus, whether its growth/lbo/vc/mezz/credit etc. so its not readily knowable which is more important to the fund youre describing. Sourcing though, at the end of the day, is the most important. You can have a great pipeline to put deals through but if theres nothing to put in to the pipeline, the fund is obviously going nowhere. Think of why summit puts so many people in hbs.
Thank you this is very helpful. I wanted to make sure the opportunity is a good one and that I don't get the short end of the stick. I basically can go into Investment banking as an associate, i have on offer already. Or I came across this PE opportunity and wanted to compare/contrast and make sure i don't get a bad bargin. I need to know a lot more about what the role entails but from your comments I think you are saying its not a bad gig.
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