I recently received and accepted an offer for the leverage finance division of a top 5 commercial bank. I plan to eventually transition to PE, but was wondering how likely this experience will help me that. I know that since the LF division isn't from an investment bank like GS/MS, my chances might not be great. What are your guys thoughts on this? I plan on doing at least two years here and getting some experience.
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Was in a similar situation as you - although the mega funds will be harder to get, you'll have a decent shot at any MM PE shop. Your main objective should be to rack some solid deal experience in your first 6-8 months to talk about in interviews.
Depending on how your bank categorizes its LevFin group, your ultimate goal of PE is very doable. It all depends on what your LevFin group does. For the example, I know Citi and GS's LevFin groups are under Capital Markets whereas JPM and BAML has it under Investment Banking. If the focus is purely origination-based (LBO, M&A modeling outsourced) as with the former then the skills and experience you will have won't be quite as transferrable to PE. On the other hand, if the modeling is done in-house (the latter), you're going to be very well prepared. If I'm not mistaken, JPM's Syndicated and Leveraged Finance kids are some of the most sought after by buyside recruiters.
Not quite right. JPM and BAML put their lev fin groups under investment banking, but JPM also lumps DCM and ECM under "investment banking" as well. Doesn't matter what they call it. It's definitely not as modeling intensive and while you still have a shot at getting into PE, headhunters will look for people from M&A and coverage groups first.
Let's clear this up.
The "umbrella" the group falls under has no impact whatsoever on the quality or nature of the work. Leveraged Finance is Leveraged Finance.
The amount of modeling levfin does isn't binary - it's a function of the bank's culture, who's historically done it for the name, the deal team culture, the senior guy who may or may not give a rat's ass about who picks it up. Bunch of reasons. Some levfin groups model more than others. Some VP's push for it every time, some don't.
Modeling is important, but there's more to investment banking than modeling. Even if the majority of Excel work is outsourced, a levfin analyst going to be part of the due diligence, internal credit memo, the marketing, the presentations, the execution documents. It would probably take a competent analyst a weekend to learn the basics of an LBO model, slightly more to grasp the nuances.
Your postulation that headhunters will look for people from M&A and coverage groups first is ridiculously generalized and just plain wrong. Excluding funds that require specialized industry knowledge (FIG and Healthcare, in particular), M&A and LevFin get equal looks.
M&A bankers are extremely strong modelers and absolute bosses at what they do, granted, but LevFin knows debt, covenants and syndication. When you think about an LBO process start to finish and the drivers of value (coupon and interest, leverage, debt paydown, margin expansion), that's where LevFin guys play every day.
To the OP - if your ultimate goal is PE, levfin is a great place to be. That being said, coming from a bank that will likely be Joint Bookrunner or Co-Manager (as opposed to the Lead Left bank, which runs the process) on the majority of their deals, you're going to have to put extra work into demonstrating you knew exactly what was going on during the deal, the sponsor's investment thesis, the highlights of the company, rationale behind the capital structure - essentially why it was a good deal. It's easy for the Co-Manager to just kind of coast along the process and collect their fee without having the slightest idea of what happened.
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