Why don't MDs go to PE?
Is it too late to exit to private equity once you are a vice president or managing director in investment banking?
I don't see why those at the highest level in the field would still want to be their client's bitches in a client service role . Do they enjoy being submissive and not having proactive responsibility? Or do they really have no other options at that point since that's all they know how to do?
It seems that an MD's skillset would be useful in PE, but maybe all they've developed after their analyst gigs are "relationship management" skills and not any real skills.
Also, what are exit opps for post-MBA Associates at top banks?
Why is the sky blue? Why is water wet? Why did Judas grab the Romans while Jesus slept?
Why did I fuck your mom?
Okay well, one of the biggest advantages to sell-side is that you are basically a middle man, so you don't really bear the consequences of your actions. If you are a PE manager and you make a few bad decisions, the fund might lose tons of money, and if you make good decisions, you can get tons of money. As a banker, you are basically sheltered from both the up and downside of the markets. Once you process an M&A transaction or a financing, you are basically out of the picture and its up to the clients to take it from there. Sure, if the client does well, he'll come back to you and you gain a bit of upside, but nowhere near as much as him. You do your bit of work, take your cut, and can rest easy at night. Everyone on this site (and basically in real life) wants to go into HF/PE for the huge pay day, but not everyone has the skills, luck, determination, whatever, to make it happen. Some people recognize this and know they can still make a comfortable, relatively sustainable living on the sell side.
The jobs are remarkably similar, especially at the highest level. You are identifying M&A opportunities, and managing client relationships. In PE, you are just the investor's bitch instead of the company...still, you really should be on good terms with management.
Compensation may be higher, but not dramatically so. Also, I think once you are MD/Partner, you have hit the "enough" level.
Some MDs like the deal process. Also, I think MDs in banking have a bit more autonomy than PE partners in running their own deals. Finally, working as a MD, provided you have a well-stocked rolodex, is a relatively secure job. PE compensation may be more variable.
It's also a lot lumpier. At the end of the day starting a new asset manager is a lot like starting any new company: It requires a lot of initial investment and usually has a J-curve before you start reaping huge benefits (realizing that incentive fee/carry etc). This goes for people like Quattrone and Moelis who start their own advisory shops as well obviously. A lot of MDs are basically high-earning wage slaves and if you don't have a big chunk of money set aside to pay the mortgage, keep the trophy wife happy, etc it might be hard to take the risk of a few years of lower income.
Politicians and Sr Bankers love them some college interns - just like college professors do their research assistants.
"Relationship management" skills are the only useful skills in the corporate world. The sooner you learn that the better.
West Coast rainmaker's spot on.. One more point though - although people on both sides are a bitch to someone, I can definitely say that LPs are less anal and demanding than clients in banking. Although MDs who like doing deals love the sell-side, I can't imagine how having to constantly pitch like 3 times each week and traveling 24/7 while coordinating one-off equity/debt deals can make someone hard - it's a psycho freakin lifestyle.. I'd still rather be on the buyside.
Contrary to what you believe, not everyone has a hard-on for PE.
Also, remember that being good at PE isn't just about being "skilful / talented", or making the "right" decisions. Your performance is still associated with your fund/firm.
Even if all of your deals work out and you make the right calls you can still look like a loser if your colleagues do other deals that perform poorly. It doesn't matter whether it's their fault or the management / economy / capital markets / government / whatever. Good luck trying to raise fund II.
Banking doesn't work this way. If your colleagues mess up (i.e. don't get deals done) it won't affect your performance as much in the long run. If you are a good at getting clients to hire you to execute deals and have established relationships, you'll be fine whether your colleagues screw up or not (more or less).
post mba banking associates languish in their own misery on the sell side, wishing they could have gotten into the buy side OBVIOUSLY
(sarcasm although unsure ;p)
http://www.wallstreetoasis.com/forums/why-would-anyone-want-to-do-banki…
There are a lot of MDs who jump to PE. Maybe it's not as desired at the MD level than the analyst level, but it still happens.
The post Mezz linked to is 100% on point. People do not understand just how brutally boring due diligence can be. It takes a special kind of person to get excited about it.
This is such a stupid question. If you are doing well in IB and making bank at the MD level or are on the fast track to being a successful MD why would you switch to PE?
Typical PE fanboy
Parroting WSO stereotypes of PE being the be all and end all
I don't think that the OP should get flamed for asking the question, because the general perception with PE is less hours, more money...so on the surface it would seem strange for people to not want to jump from the sell-side...but, as people pointed out, it's a bit more complex that than. Like Kenny_Powers alluded to, PE funds, in many ways, are businesses and the MDs are essentially entrepreneurs. They are typically taking a substantial amount of their own money and investing it along side of their LPs...just like most small businesses would do. Their return is shitty for the first few years and it's not until they hit some big liquidity events that they are likely to even see some of that money again. On the sell-side, you are often just an extremely well compensated sales guy who has little-to-no ownership in the firm and thus you are taking very little risk.
Additionally, some people just enjoy the grind on the sell-side and despise the diligence process which, as TheKing pointed out, sucks. I was in the office late Friday with one of my partners and he was just negotiating points in our term sheet trying to convince the company and their lawyers that we aren't going to concede certain points and then trying to determine where we could make some concessions to show that we are negotiating in good faith and not trying to be demanding or unreasonable. Mind you, these are not some Hollywood style negotiations where you are yelling, "Take it or leave it" and slamming the phone down...you are literally walking through the docs pointing out what would be a problem for other partners to given in on and which ones have some room to move. I was merely listening from my desk and was about to hang myself with a USB cable.
Regards
Staying beyond analyst years is incomprehensible to me personally, you just really really have to love doing deals.
What puts me personally most of the job is the idea that you are just a little bitch.
Sure PE partners answer to their LPs and CEOs answer to their shareholders, but both those guys are a hell of a lot less demanding.
Also banking does not pay well at all in my opinion compared to the hours worked.
If you believe you have the relationship skills and political acumen to be a very good md, then sales will surely pay better, alternatively just become c level in some f500 firm, if you just work 70 hours a week there you should outperform just about everyone, at the highest level your comp will be on par if not higher than banking.
So stop being the client's bitch and become the investor's bitch......you're always going to be somebodies bitch if you want their business and money
right on the money. just like the other saying goes "there's always someone smarter than you" so in this case, there will always be someone that you are a bitch to.
Not a bitch.
If you run a PE fund, you aren't the LPs bitch. Unless your fund is performing poorly/losing money.
LPs are either your suppliers or customers. Notice, I didn't say client (its not a slave/master relationship). You sell them a product, they either buy it or not. Alternatively, they supply you money for your deals on certain terms, or you don't take it.
How many times do you think an MD at a PE fund even speaks with his LPs? You aren't answerable in the same way as in investment banking, probably not even as answerable as a CEO of a public company (particularly if you have more than one type of fund).
Now, this may sound terrible, but there is a reason why the Managing Director never turns down a request: He has an army of people below him that will be the ones who do the actual work. You wake up in the morning, review the work that was completed in the middle of the night, and sign off on it or send them back to the drawing board. Yes, you're the one who is ultimately held accountable for making the client happy, but the incremental work to the Managing Director is almost nothing. Doesn't sound too bad to me.
Ultimately, the Managing Director job isn't as bad as the ones leading up to the title. Endlessly pitching new business is obviously very tedious, but it can't be much worse than flying around the world every five years to meet with potential investors to pitch your fund (which can last up to two years depending on how successful your fundraising is). I certainly wouldn't fault anyone for choosing this career path in life.
All of the successful MD's that I know are born salesmen. They love the thrill of the chase, getting deals done, and having a network of CEOs/CFOs to work with and sell to. I find that those who are more quantitatively/analytically minded (like most analysts these days) strive for PE more, while more old-school, extroverted "sales-y" young guys like to stay in for the chance to chase after big fish on their own.
In the end, it depends on the type of person you're dealing with. Yes, you can be the client's bitch, but most of the MDs I know are good friends/acquaintances with their biggest clients and enjoy dealing with them/working in their best interests.
2 points to add to that:
On the IB side, you can do fairly well if you have just great sales skills (i.e. you bring in the deal and let deal guys take it from there...) On the PE side, you need to have both sets of skills - sales skills to raise money for the fund and convince everyone (potential investment company, banks, etc.) to go with the deal, and quant skills to manage the investment over the entire multi-year cycle...
Also, in IB, you gotta love the constant game of selling, whereas in PE, you're stuck (for better or worse and for large chunks of your time) with overseeing/managing the existing investment...
Real answer: because they are a bunch of fucking cowards with small dicks.
Definitely some good points. I'll synthesize:
1) MDs in banking are not the most analytical thinkers; they like talking, posturing, wining and dining, and revising others' work. They enjoy the thrill of closing deals and don't really give a shit about how much value they add, and they get a hard-on from making clients happy. Thus, they feel at home in a sales role, which is essentially all it is. As a crude analogy, some girls really love giving BJs, but it's not the act of it that they like, it's that they enjoy satisfying someone and being responsible for it.
2) People on the buyside, on the other hand, enjoy thinking deeply about investments, assumptions, sensitivities, and industry ecosystems. They are interested in the truth, i.e. filtering the bullshit that bankers, management, and equity researchers throw at them. The work is "drier" to some who'd rather just be talking on the phone all the time, but obviously appeals to different type of person.
3) As was pointed out, you are not an LP's bitch as an MD in PE. You get 20% of the returns (comprises most of the paycheck) so you have highly aligned interests with your investors. Worst thing that can happen is you perform poorly and have a hard time raising the next fund, but YOU are putting the pressure on yourself, not a client. You're working for yourself and your partners -- the LPs don't enter your mind much.
Dude, it's PE, not some trapist monk "seek knowledge" bullshit. They're concerned with buying a good business for as cheap a price as possible and selling it for a return down the road.
Also, it's clear from a lot of comments that people have no clue when it comes to either banking or PE. The idea that MDs at legit banks are buffoons who can't count is a joke. Two of my old MDs were smart as fuck AND had solid sales skills. Just because you aren't investing and jacking off during due diligence all day doesn't mean that you don't have to come up with creative solutions and transaction structures for your clients. Come on, now.
Also, Partners in PE aren't exactly in the weeds everyday, that's what Associates, VPs, and Principals are for.
Quoted for truth. The way some people idealise the day to day grind of PE is exhausting.
On a positive note, at least senior bankers have it better than corporate lawyers who just document transactions.
wtf is with the topic pic ?
IBD = legal slavery lol
I'd like to see that lol
Lets say you have a MM PE offer and return offer from your bank. Lets also say that you were clearly a top performer and have received hints that you could get promoted up the ladder quickly. I don't know about the rest of you, but I would be pretty tempted to stay with IB. A reputation is a valuable thing and you are starting over as the low man at a PE shop.
Question for those in PE: how much of the stuff you disliked in banking (e.g. the false sense of urgency for everything creating unnecessary fire drills) is absent in PE? Also, how much more difficult is the work?
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