Would you still go into investment banking if LBOs became extinct?
Many of us go into IBD with the intent of leaving for bigger and better things (yes, PE/HF on the path to greatness). What if PE just became outdated in the next 5-10 years? What if LBO's don't come back with a boom like they did in the 2000s? Would you be okay with being a banker for the rest of your life, or would you try to go into an HF or corporate finance?
There's no way in hell I would do this profession for the rest of my life.
I'd rather go on a HF track right now anyway, but if PE disappeared my dealflow would have been essentially nonexistent this summer
LBO's will never be like they used to be in the early-mid 2000s where PE firms would put on 80% or more leverage on an investment, where literally any LBO would produce a decent IRR. I think PE firms will still exists if LBO went away, probably in a different capital structure.
If they did go away HF, ER, or corporate dev. i go.
If LBOs went away distressed PE would still be around. PE groups that focus on growing companies i.e. making the transition from small (less than 500 MM) to middle market will still exist.
The question you pose has no doubt been pondered aloud multiple times over the last 30+ years. There have been recessions before, booms before, busts before. If all you're chasing is the buck you wont be happy in any profession. There have been many times over many decades where the finance industry said the pay will never be as good as it is now, this will never be the same etc, and in many cases they were right. Look no further than S&T for proof of that. But the money is still good and the work is still (often) interesting if you like the industry or group you're in, and that's more than a lot of people can say about their jobs.
When I started as a sales trader 5 years ago my boss said, " we used to be really really overpaid, now we're just really overpaid, soon we'll just be overpaid, but we'll always be paid." He has been right on and that is a dinosaur business if there ever was one. IB, while consolidated, shifted, changed, etc as it may be, is here to stay as is private equity and fund management. But don't get into anything if you expect the status quo, whatever that is in your viewpoint, to remain.
No way I will stay in banking long term. Don't know why kids would cut their left nut to work in banking.
While i can say my banking days were the most miserable times of my life, I can honestly say I would do it again (and not just for the potential of a mega-fund position). The work ethic, attention to detail and overall hell you are put through is the absolute best preparation for any career (PE, HF, Corp Dev, Start-up, etc), and I feel I picked up many intangibles from my banking days. Also, it made it completely clear I never wanted to work in banking or any job similar to it (hence why I left my presitigous position at a mega HF post banking for my current VC job and could not be happier).
What were the similarities between the mega-HF and investment banking? The hours?
Def. the hours - they were as bad if not worse than banking and at that point I was checked out. Also, I realized I wanted to be "hands on" with portfolio companies and actually have some say in the investment process (hence why I am at the VC I am as associates do). At the mega HF, I was simply the best trained monkey money could buy, and that was really it.
I second this...regardless of "megafund exit ops" or not, no other job gives you similar exposure and learning opportunities right out of college
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