Private Equity

So I’ve just had two interviews two days in a row ending today for a PE entry position. One of them is at a BB with several funds in excess of $1Bn in AUM, the funds typically deal with LBOs. The other is a botique PE firm that focuses on turnaround strategies, it’s been around for only six years and it has less LPs and therefore only one active portfolio with three or four firms. None of them have been exited yet, but doing well.

Assuming I get offers from both, which bank should I choose? Will the salaries be a lot different? Compensation and bonuses probably would more variable at the smaller shop depending on performance, but more upside as well. The interviewer at the smaller shop told me the great thing about smaller PE shops is you get to grow with them, more coherent team enviroment, better interaction/mentoring from the MD, and likely better hours. It’s a slim chance that I get handed both, but I need to be prepared to make a quick decision just in case.

Also, I have an almost certain job offer in ER at one of the top 3 BBs in my region. But I prefer the buy side personally. Thoughts anyone?

Sounds like you are a great candidate to be considered for so many great-sounding positions

I have an average resume to be honest. 2.8 GPA econ major, but at a top B-school. I’m surprised myself.

note top B school, not hacksaw-University

^ I know :frowning: Wish I had been on this site years ago

It does help a lot. All of the 3 mentioned job offers, including some previous ones were all from the school’s network portal. You wouldn’t find the vaccancies posted on their website, or anywhere else, so that’s definetly a big boost.

I also have an interesting resume/story. Starting out in computer science, then switching to econ and maths, now finance after graduation with the CFA, had a short intern stint for AM department at the best BB in my region (my dad is close with their CEO :slight_smile: but unfortunatley could not land a full time job at that point seeing as they were overemployed. They do bring up my GPA though, but rarely question it.

Alright so my question again in short:

Top MM PE fund - Successful track record with potentially billions in AUM - Dozens of investment professionals - Better on CV for potential future moves, but potential wall in career progression

  • Mainly LBO strategies

Small MM PE fund - First fund under $100m, raising capital for a bigger second fund - Potentially faster career progression - General Partners are former MDs at top IBs - Maybe 6-7 people on the team, a couple more on operational (industry specialists)

  • Turnaround/distressed opportunity strategies

Wait, have they actually offered you a job yet? If not, then you are getting a bit ahead of yourself with this dilemma, no?

If you do have offers from both, then I think it’s pretty clearcut you should go with the bigger firm. A fund with $1 billion in size is always going to look better on your CV I’d have thought.

Agreed with Carson. It’s a completely different level of urgency once you actually get the offers (must be a new theme on AnalystForum - people getting ahead of themselves), and you still have a lot more info you need to collect (but you will get that from the firm once you actually get the offer). Nonetheless, in the spirit of being constructive…

The bigger firm will be a better “check the box” sort of thing on your resume, and the smaller firm has been around long enough where if it were really good it should have been able to scale assets a lot more, so odds are it will end up being a middling subscale fund.

The one thing not to like about the “top MM PE fund” is that there are “dozens of investment professionals” – this is bad from a compensation perspective. Too many mouths to feed. All the true “top MM PE funds” run comparatively lean and you should be able to clear $250K all-in at the pre-MBA level. And if you didn’t work in PE before your MBA, odds are against getting a job at such a firm post-MBA.

Also, check your enterprise value calculations. You’ll need to get these right for your PE interviews.

Good luck

Thanks for the response.

I already acknolwdge the very slim chance of getting both offers. Seeing as it’s a competitive field, there are bound to have a series of interviews with more professional candidates than my own. Which isn’t something difficult to achieve. Just want to get a more clear picture to my personal knowldge, and also decision making just in case.

I agree that a bigger shop will almost always be superior to a smaller one. But each have their own pros, indusrtry exposure, and different fund strategies to work with. But looking forward, I’d most probably favor the top MM fund, if I ever get to choose.

Regarding your EV calculations. I’ve already completed a one-hour fit/technical interview at the second shop, so there should be nothing else. She was impressed by my finance knowledge for a fresh grad, seeing as I’m well read. I’d typically answer brief questions like “What is beta” with a 5 minture monologue. I’m guessing the only thing stopping me from getting an offer there is the fit culture. If you’d re-check my calculations of EV in the other thread, you’d find that I’m indeed correct, the only difference is you’re going by popular textbook definitions of EV to suit M&As, while the proper intrinsic value of a firm and hence their fair value of common shares is derived as posted.

Didn’t read all your posts, but from what I saw in your first post, your treatment of cash wasn’t quite correct.

I don’t have time to re-check your calculations either now or in the future, so maybe you got them right in your follow up posts, but who knows. Let me just say that my going by “popular textbook definitions of EV” is not the only difference here – another key difference is that I’ve actually worked in IB/PE/ER/HF.

Lastly, fit is extremely important in any PE interview; I’d argue it’s more important than technicals at your typical LBO fund. For example, a five-minute monologue on beta? You’re not teaching a corporate finance class; you’re on a job interview.

Yes, you didn’t read the whole thread, so that’s where the misunderstanding lies.

Basically I was arguing that deriving the fair value of equity from the EV forumla was incorrect. Which it indeed is.

Fit interviews are very important, true. You get to work with a small team for countless hours all year long, it’s important that you’re likable and a team player, more so than your financial modeling skills, or deriving ratios.

The technical interview was at a turnaround fund, it was simple to just say beta measures the volatility of a stock price relative to the market. But I believe beta means much more than that, and I didn’t feel like leaving any holes open, they certinaly didn’t mind.

Well you certainly don’t lack for confidence that’s for sure! Depending on the firm, and person, you interview with that can work for or against you. It is good to be confident and assertive, but be careful you don’t come across as brash or arrogant. Remember, you’re just out of college. From the perspective of a senior employee at one of these firms you have no experience. Cover you bases on questions sure, but you don’t want to come across as though you are lecturing to them. I doubt that would go down well.

I think you have an extraordinarily high level of self-confidence for a recent graduate. Sometimes, that’s a good thing; other times…

you are one wack dude Mr. Smart. I hope these PE firms put you in your place kid.

I understand how my tone in text can come off as arrogant, I assure you, I’m very laid back in person.

There is a very fine balance between coming of as intelligent, confident, and humble. I believe people posessing those three traits would have a lot of success in the finance industry.

My answers to technical questions were carefully articulated. For example, using the how to derive beta question. I’d first give the simple answer that most candidates would by typically regressing stock price with a market index on a monthly or weekly basis, depending on the liquidity. Then I’d pause for a moment and add to it by saying that I don’t think this is the best method for deriving beta because…etc. A mote accurate calculation would be…etc.

We’d sometimes have discussions on some of the questions and best practices for application and theory. I felt both parties really enjoyed it, as I got to talk to some of them on off topic issues post interview outside.

Five minutes on Beta? Let me give it a try.

"Thanks for the great question. First, Beta is a measure of asset or portfolio volatility relative to some broader market, but it is so much more. It is also a letter, possibly greek, and sometimes a fish.

The greeks have contributed a great deal to modern culture, such as yogurt and the university fraternity system. Within the construct of that university fraternity system, there exists a fraternity called the Alpha Betas. The Alpha Betas were explored extensively in the 1980’s documentary Revenge of the Nerds. This documentary was unique in that as a young boy, it allowed me to experience bush for the first time. My parents were somewhat less than thrilled with my repeated viewings of the movie, but it was very important to my growth into the confident man standing before you today.

When I first branched out as a man, I had a nice little studio apartment. It wasn’t big enough for a dog, and I’m not a cat guy, so I got a fish tank. I had some tetras, which I don’t believe are a greek letter, but I also got a beta. The beta ate the tetras because he was a dick."

I timed this and I’m only at like 50 seconds.

You’re either a fast talker, or I might have experienced time dilution at that moment. Either way, I admire your sense of humor :slight_smile:

This thread is beginning to go down the path of another recent thread where Numi dropped the hammer. MrSmart, I strongly advise you to take the approach of humble confidence. Understand that you don’t know everything and are open to instruction. Confidence is good, but can go down a path toward arrogance, which is highly ostracized among PE/ER/IB/HF (especially for analysts and associates). Learn this early in your career or I promise you, you will find out the hard way. I’m not knocking on you – I’m attempting to help you.

Regarding your initial post, I echo the sentiments shared by Numi and Carson. I would recommend pursuing the BB or a very highly reputable PE firm. The name associated with a top firm provides immediate brand recognition and that name will stay with you the rest of your career (via your CV of course) and could potentially open doors for opportunities you’re really interested in pursuing down the road. Moreover, you’re marketability would increase substantially after working for a BB or top PE firm. I see it as a win for you no matter what happens. There is greater uncertainty surrounding the boutique firm and it sounds like the firm hasn’t proven itself yet.

I concur, even though I can’t shake the feeling that a smaller PE would be more dynamic and overall a deeper experience, the more obvious choice will be more fruitful for my career. Big names provide a quick screen for candidate quality, as much as I hate to admit it.

Thanks everyone.