Hi,
I'll be interning at an MBB firm this summer and I'm thinking about working in their PE practice. I'm wondering what things MBB firms will actually do for PE firms. I'm especially curious because I know that PE professionals are usually very smart and often have MBAs and significant business experience, I'm therefore a bit confused why they'd routinely use consultants who aren't necessarily smarter then them. Do PE firms hire consultants because the work that they are selling them is "too low value" for the PE firms to want to do it themselves, or do MBB firms actually offer stronger problem solving abilities within certain domains?
If you can cite any projects that you know of between PE firms and MBB associates that'd be great too. Also, if I were to focus within my firms PE practice, what kind of skillset do you think I'll have developed after about two years on the job?
Thanks
PE teams outsource all due diligence to third parties. They run a billion dollar deal with about 3-5 guys in-house but easily 25-100 guys from third parties to support them. They use laywers, accountants, HSEQ experts, etc. etc.
MBB consultants helps them in scrutinize the business plan of a target (how big is addressable market, what is market growth, what capabilities does the target have to capture market share, how realistic are cost assumptions, etc.). MBB consultants do a lot of interviews with true industry experts and than summarize and structure all that info into a comprehensive and consistent story. MBB sometimes have in-house experts in a specific field and that really speeds up the whole process and brings extra depth to the reporting often, but biggest value add is instant brain capacity on demand.
PE guys in the end need to be able to oversee all the information and make an investment dicision based on that. Their job is to source new deals, have a network of good managers, gather investors and have sound investment judgement.
Thanks for the reply. Do you think that if I were to work in this practice area I'd mostly be conducting, digesting, and presenting the findings from "expert interviews"? Or are there real opportunities to advise on the management strategy for the portfolio company, or make a recommendation of buy/don't buy to the PE company? Also, would I as an MBB associate gain any kind of valuations skills or exposure? I know that MBB firms are not in any way financial advisory firms, but do they ever make recommendations on deal transactions?
Also, my ideal trajectory would be to spend 2 years at my MBB firm and then either recruit for a growth/operationally focused PE fund, early stage startup, or start my own venture. Should I choose to go the PE route, how do you think my skills would compare to those of bankers? Would they have significant advantage over me in understanding how the industry works, or do you think that if I spend a good amount of time in my firm's PE practice I'd have a comparable skillset to them.
I appreciate you taking the time to answer these questions. I literally know no one who works in PE so this is quite invaluable to me.
Depends if you're wokring on buy or sell side. Sell side you need to present things positively (like on consultant once told me: it's the same strategy, but we just articulate it better). On buy-side you can be much more critical. However you don't do the valuation and everything has its price, even bad assets. Brings me to the second question: unusual for MBB to do valuation in a PE mandate. MBB does however advice on corporate finance, but its more geared towards strategic buyers I believe.
MBB consultants are much looked afer in European PE but less so in US I believe.
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