For junior investment bankers, the move across to private equity remains the promised land. Senior bankers advise against it, but there's still something of a clamour to get into the buy-side early on in your career to escape the punishing hours in IBD and, in the long-run, get the big money from carried interest. But is it really that great?
One private equity professional, who switched across from the leveraged finance department of a bulge bracket investment bank five years ago, gives us an honest account of what it takes to succeed in the sector.
Honestly, how tough was it to switch from an investment bank into private equity?
Not that hard for me actually, as it came about through connections. As a junior banker seven years earlier I had worked alongside a VP at another bank. He moved to PE a year later and five years later he was looking for someone with my profile. Not to blow my own trumpet, but he said that the only reason he called me was because for a whole year I worked harder and smarter than any of the guys in his own team.
How are the hours?
If you are in the middle of a deal then they're as bad as investment banking – 16-hour days, the odd all-nighter, life sucked away during the weekends. Otherwise, I am usually home in time for dinner and, aside from the occasional half a day or calls over the weekend, generally they are mine. This is also because I am now fairly senior. The hours can be punishing on the juniors, but not as bad as in a bank.
Do private equity firms offer instantly more money than banks?
Cash comp is the same, it's all in the carry. But the switch is not just for comp, it is a significantly more interesting job (namely, not just pure M&A or pure leveraged finance) as it incorporates a range of disciplines, some of which you are strong at (usually based on your background) and some which you have to learn about quickly.
Also, people are much easier to work with - banking attracts a large number of people, many of which are ego-centric, yet unproductive slave-drivers. A PE fund will have its own culture - if you do not fit with their particular one you will not be offered a job, but if you do fit and get offered a job, you’ll be working with like-minded people.
What's the main difference between working at a bank and working at a PE firm?
Generally, more pleasant and less obnoxious people.
Is the work more interesting? Why?
Much more. You need to know about people management (unheard of in a bank), operations, finance, financing, M&A and exit preparation.
Do you have more individual responsibility?
Yes. You will usually have, say, 50 objectives to meet in the operational improvement of company, divided between two to three team members and portfolio company management. Also, each team member is always on the lookout for add-on acquisition opportunities.
What sort of personality succeeds in private equity?
Cerebral, calm, team-players. Hard-ass "originators", pumped-up cowboys and masters of the universe fail - and that is if they get hired in the first place.
Are junior bankers really clamouring to get into PE now? Who gets hired?
Generally they are, because although it's the same pay, it's a better work environment and has the prospect of carry several years down the line. Top-class analysts and junior associates, with good reputation in the City get hired, but being the ‘perfect fit’ is just as important. This means the right combination of personality, work-rate, reputation, fitness levels (some firms like people to exercise and take care of themselves, as it reflects on their wider personality, but others care less about this), extracurricular activities (guys 100% dedicated to work don't go down too well, they want you to have other interests) and generally they want well-rounded, smart people.
Is it easy to crash and burn once you make the switch?
Harder than in banking. It is, at worst, the same workload, but generally somewhat better.
What one piece of advice would you give to someone trying to start out in PE?
Get top grades at a top school and top grades at university. Do two to three internships at top-name banks and excel at one extracurricular activity, and be good at another - ideally one sport and another related to arts, charity or something off the beaten track. Oh, and don't be fat.
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