12/31/16

I see a lot of high school/college kids providing advice and "insight" into how firms place, how people should think about exit opps, what groups are best, etc. This has resulted in a lot of really stupid commentary on this forum, and I hope to remedy this. A few points:

1. Your group doesn't really matter at a certain point.

If you're at a bulge bracket or elite boutique (pretty much any office of any BB or EB) then you will have access to top exits. For those of you at MMs/lower MMs/regional boutiques...sorry, I don't have anything encouraging to say to you. But lower bulge bracket bankers get hit up by headhunters about opportunities at KKR, Warburg Pincus, etc. The reason they don't seem to place into those firms? They don't do well in interviews. At the end of the day, super smart and polished analysts do not go to Barclays or DB, they go to GS or Evercore. That drives exits more than the brand on the door.

2. Pretty similar to the above point - boutiques place just as well as BBs, if not better.

Yes, this includes Centerview, which somehow has a reputation for placing poorly. And I would be very, very surprised if PJT analysts placed poorly even though they're a "new firm." Buyside firms want to hire smart, cool people. Do you really think that headhunters are going to say to themselves "meh, I know the kids at PJT are smart but it's a new firm so I'm just going to ignore them"? Or "oh yeah, Centerview is retention focused so that 21 year old kid chose the firm definitely with the intention of making partner. I might as well not even try."??? CVP has placed analysts into plenty of top firms, and PJT will do the same. Best way to judge a firm's exits is to look at the people they hire. Are they smart? Then they will place fine.

3. Your school and your GPA still matter a lot.

Even if you go to GS TMT.

4. Deal flow matters.

If you have some cool deals to talk about, you will go much further than a kid who doesn't have anything to say. Having said that, MF recruiting is so ridiculously early these days that you may be able to get away with having almost no deals (or only confidential ones) on your resume, but make sure you have things to talk about (analyses you've done, how you've thought about things, etc.)

5. Geography really matters.

It's very difficult to go from SF/LA to NY. Trust me, I've tried. I think it's easier to go the other way, but you will get looks primarily from regional firms (GS SF tends to place into SF offices, etc.) Everybody knows this to some extent but I'm just reinforcing that it's super important.


So a bit of advice based on the above.


1. Don't be stupid and go for exits over culture.

Culture is INCREDIBLY important. You don't have to give up your life for two years in order to get a good exit. Say you get two offers - one from BAML LA, and one from Moelis LA. You love the people at BAML, you hate the people at MoCo. You'd be stupid to take BAML right? Moelis LA is amazing right? Don't be a moron - just take BAML. It's not one or the other - if you do well at BAML and prep well enough for interviews, you will place fine. And you will be a much happier person at the end of the line.

2. PREPARE.

Seriously. Some top candidates are complete morons across the table when they're talking about their experience. And PE interviews, honestly, require the intellect of a mentally challenged housefly. Just memorize deal metrics, practice your modeling, and be cool (don't spaz out). You'll do fine.

3. Specialize.

Know what you want, and target those opportunities.

4. Pick an industry group you care about.

Unfortunately, for reasons I still can't understand, the industry group you get placed into right out of undergrad has tremendous influence on the group you'll get placed into after your analyst years. I get the intuition and rationale behind HC PE firms wanting to hire HC bankers, but honestly two years of analyst experience builds up very little expertise or specialization. Regardless, if you hate technology, don't try to go into a technology group just because they tend to place well.

5. Don't close yourself to the notion of staying in banking.

Take your first few months as a trial to see whether or not you can see yourself going on until you make MD. Do it with the understanding that 1) analyst/associate years eventually end, 2) the money in banking is as good as (if not better than) the vast majority of career track exits, especially on a risk-adjusted basis, and 3) you can find plenty of exits as an associate or higher, although they tend to be corporate roles until you can start adding value with relationships as a more senior banker.

I'm sure angry high schoolers will want to say I'm wrong about all of the above, but whatever I'm over it.

Mod Note (Andy): Best of 2016, this post ranks #25 for the past year

Comments (28)

9/10/16

Thanks for posting. Would you mind sharing your observations on exit opps for Associates and VPs?

I enjoy working in IB and am happy to do it for a good few years. Larger banks are also great for internal moves to different geographies so it makes sense for me to stick in IB for a while as I'm looking to move abroad, at least semi-permanently.

However I don't see myself in an origination role at a bank (ie AD or above). I'd much rather move into VC/HF/PE after 5-7 years in banking if I'm going to be sourcing deals.

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Best Response
9/12/16

I can only speak to PE, but moving as an IB Associate 3 / VP 2 (5-7s of IB experience) into PE is incredibly difficult because neither a post-MBA or pre-MBA PE position makes sense for you or the employer. You won't be placed into a post-MBA because the typical post-MBA positions are just really hard to come by, most PE shops want people that have prior PE experience and went to a top MBA (I've anecdotally heard even Wharton MBA folks have struggled to recruit into post-MBA PE positions in the recent years), there are more than enough people vying for these openings that are highly qualified, and you don't have much value add without prior PE experience. As a post-MBA, you should be able to start running a lot of the diligence process and managing the pre-MBA associates, which someone that's joining with 5-7 years of only IB experience just won't be able to do. Doing diligence during a M&A process is very different than running the M&A process. I have seen folks coming out of a top MBA, go into MBB, and then lateral into a post-MBA PE spot at a consulting heavy fund, but that's less than a handful. On the other hand, you have too much work experience to be in a pre-MBA PE position. Some new MM/lower MM PE fund that don't have a structured hiring process may look at an IB person with that level of experience for either type of position, but it'd be highly opportunistic (think a brand new fund that just raised $200mm of capital, in a random geography that has a hard time attracting strong talent that would want to move to middle of no where city X).

Frankly from your perspective, you'd be doing yourself a huge disservice to jump to a pre-MBA role. If you're a IB ASO 3 or VP 2 going into pre-MBA PE, you're going to be taking a massive pay cut (most PE pays $175-$250k vs. probably $350-$600k in IB at that level), at the very bottom of the totem pole again (no more pawning off shit you don't want to do and there's still plenty of shit work in PE), and working more hours in PE than in IB. On top of that, you're still going to have to compete with those highly sought after post-MBA PE positions which might require you to get an MBA (and you'd probably be a little too old at that age), and would still be a pay cut because the little carry you start to receive isn't guaranteed and has typically 5-7 years before fully vested (and had you stayed in IB you'll have continued to see increases in comp). Also, as you move up in PE, origination/selling becomes just as important. You have to sell yourself/your fund to the management teams (price doesn't always win the auction, especially in MM), you have to sell to LPs to fund raise, and the more you can source proprietary deals the more likely buy cheap and generate better returns.

Most people don't make it to partner in PE, and I believe especially true for folks that are getting into the PE industry these days where it's a much more saturated market than 10-15 years ago. This is my personal opinion, but I think there's a very strong argument to be made that regardless if you stay in IB or PE, your career in either of those tracks will most likely last 5-10 years because most just don't make it to the top. If that's the case, you'll maximize your earnings potential over that time period just by staying in IB and being middle to top ranked, and avoid the risk associated with having to pay $250k plus two years of earnings give up for an MBA and possibly seeing very little of your carry because the fund either didn't perform well or you weren't vested by the time you left. If you ultimately end up in some kind of corporate development or corporate strategy role after IB/PE, coming from a GS/MS/JPM is probably just as good if not better than a non MF PE (some industry folks just aren't going to know a lot of the PE funds outside of MFs even if your returns are great). Btw, I'm not advocating against going to PE obviously because it is a different job and you can learn a ton, especially if you can do it in your analysts years. But it's just not as simple as PE > IB, there are other considerations.

9/12/16
unidentified123:

I If you ultimately end up in some kind of corporate development or corporate strategy role after IB/PE, coming from a GS/MS/LAZ/etc. is probably just as good if not better than a non MF PE (some industry folks just aren't going to know a lot of the PE funds outside of MFs even if your returns are great).

Just curious what your reasoning is behind Corp strat/dev being as good or better than non mf PE ?

9/12/16

Oh I didn't mean that corpstrat/dev was better than non MF PE as an exit opportunity. I meant that regardless if you stayed in IB or jumped to PE, corp strat/dev is a very likely end destination because most don't make it to MD/partner in IB or in PE and corpstrat/dev is a natural next step. So if you end up in the same industry role regardless, going to a non MF PE isn't necessarily clear cut better in terms of compensation or brand name.

9/12/16
unidentified123:

I have seen folks coming out of a top MBA, go into MBB, and then lateral into a post-MBA PE spot at a consulting heavy fund, but that's less than a handful.

Could you specify which funds are consultant heavy in NY? I am m7 post mba that just exited to corporate strategy but PE/VC roles are more desired.

10/10/16

[na]

9/12/16

Geography is mostly a limiting factor with regards to logistics. So using your example, the candidate you described would on paper be a perfect fit for a NYC based tech fund / group. However, being a 5-hour flight away does have serious drawbacks that will ultimately limit your ability to recruit on the other coast. Any associate recruiting process will includes at least 3 rounds (and I include social events such as coffee chats, drinks, dinner, etc here) and many funds will do as many as 5 or 6. These are often organized at the last minute or need to be moved around quite a bit due to deal and travel schedule. Given it's not abnormal for candidates to go through recruiting for 10+ funds, you can see why going through all that is much easier for someone who works down the street than for someone who's on the other side of the country.

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9/11/16

This guy couldn't be more wrong. My middle market firm has placed numerous people at BX, TPG and HIG to name a few. Middle market banks get great exposure to PE firms as most companies they represent on the sellside are being sold to a sponsor. As a result PE firms realize these analysts are the real deal and have relevant experience selling to a sponsor, whereas Bulge brackets do a lot more strategic deals.

Not saying you have a better chance getting into PE by going the middle market route, but saying there is "nothing encouraging" about working at MM is ignorant. I will also say that yes more people from BB firms go into PE but I would say the same % of analysts at my MM place at the top PE firms as the same % of analysts from Goldman or JP.

Also, the feedback I've gotten from the ex analysts that have gone onto to PE firms is that they're better prepared than the BB kids. They were part of leaner deal teams and executed more deals during their two year analyst programs than BB kids.

Sorry but OP sounds like of the college or HS kids he describes in his post.

9/12/16

I'm tasting the salt here... While I do agree the OP was rather dismissive of MM placement, I'd agree that non-BB/EB bankers are at a considerable disadvantage when recruiting for MF's. That's not to say that there are no exceptions; I've heard of a guy at BX NYC PE from Raymond James (keyword heard, but you get the point.) However, these candidates tend to be anomalies. If you want an idea of what placement is like, scroll through the team pages or Linkedin profiles of the associates at a PE fund you're interested in and see what banks they came from. That'll give you a decent picture of where MF's tend to recruit.

That being said, getting into a MF in general is a crapshoot. I'm willing to bet that less than 5% of bankers from your classic BB/EBs will get into MF's. So its a struggle for everyone really.

It's okay if you disagree with the OP, but I'd say he's spot on. Don't be so butthurt about what he's saying because maybe you really do have a chance for BX/TPG/HIG/wherever your buddies went to.

9/18/16

Are you sure they were at BX and TPG buyout (vs. distressed or other places -- not that they are not also great places, but also different)? HIG is a very different animal and very willing to take MM PE analysts because they typically work on smaller transactions (avoiding larger auctions is probably the biggest driver of their top quartile/decile IRRs over the years)

Also, going to a BB does not limit you the way that an MM does. Maybe not BX or TPG, but there are absolutely top PE firms that will only interview or give offers to top BB candidates - look at H&F, Bain, or Berkshire for instance, and having the ability to get those looks is critical because PE recruiting is very competitive and it is an absolute numbers game.

9/12/16

This is literally the same crap that gets posted on these fora on a daily basis. Absolutely nothing new here.

"Elections are a futures market for stolen property"

9/12/16

I've seen recruitment both at UG and grad level and boy do the smartest people not go to the best firms. The banking recruitment process is generally quite poor at identifying the best people.

9/13/16

Are you saying that first impressions from a 30 minute - 1 hour interview with questions that can be memorized/BSed aren't accurate representations of a persona's intelligence and competence?

An absolute mad man.

9/26/16
frenchstudent:

I've seen recruitment both at UG and grad level and boy do the smartest people not go to the best firms. The banking recruitment process is generally quite poor at identifying the best people.

True, but there is a lot to be said for "most polished". Your true geniuses are often slight oddballs.....socially functional and even charming but just eccentric enough that you can notice it.

Also keep in mind that banking is a sales job. You need to be smart enough to handle lots of Algebra but attention to detail and sales skills are a lot more important in the long run. If you want a job where brainpower is the main determinant of success join a quant fund.

9/30/16

To get into IB, even at the SA level, the top qualification is work experience, not school, GPA, or SAT. If you're a Wharton/4.0/2400 but have irrelevant work experience you're probably not going to be first in line.

9/14/16

Thanks for the informative post, OP. Would be great to hear you elaborate / others perspectives on the emphasis placed on undergrad school & GPA during PE (MF & MM) recruitment process.

More specifically, would a non-target not even be considered for first round interviews by some PE firms? How does non-target status impact HH perception? Are there tactics to overcome any barriers that may exist for non-targets? ...etc.

9/17/16

Other than the obvious distance / travel time what are some of the main reasons that it is so hard to recruit for buy-side roles if you are working on the West Coast and interested in East Coast exits?

9/18/16

How hard is it to change industry groups going from ib to pe? Is interest in changing groups something you should make explicitly clear when going through the buy side recruiting process?

9/26/16

I'm curious. As a soon-to-be first year analyst at a "top" MM / "low" BB firm (Jefferies / HL / UBS) who doesn't care about working at a MF, what do my exit options look like? A couple of weeks into my summer around half of the analysts in the group I worked in the most left to PE firms and a couple to other banks. I'm more interested in the MM PE space and corporate development. I come from a semi-target school and have a good GPA (3.9) and already took the GMA (740), but GPA should go down this year as I'm taking rough math & CS classes. I searched previous posts but OP seems to have a different opinion on MM exits than others (not exits to MFs, just exits in general). Definitely not disagreeing with OP as I have only worked in banking for 10 weeks -- just confused by the discrepancy & wanting to plan ahead.

9/25/16

Not all of the smartest, most qualified analysts are at EBs / BBs. As someone mentioned, a couple 30 minute interviews with highly predictable questions are pretty easy to get by on. There's also a fair amount of networking involved - can't tell you how many times I saw kids in my fraternity get jobs @ elite boutiques / BB because their dad was a major client or worked there before.

Headhunters reach out to the EBs and BBs more aggressively than MM for 2 reasons. (1) It's a number's game - there are just more NYC analysts at these banks over regional banks (2) PE tends to be more focused on prestige / legacy. If a PE fund gets in a habit of hiring a bunch of GS / MS kids and those kids have done well in the past, they continue to just have a huge selection bias. You know what the training program is like at MS, GS, etc. You may be blown away from some all-star @ Edgeview or Stephens, but more often than not the known commodity gets chosen. The instances where I've seen regional banking analysts get these jobs @ TPG / BX is when a deal team worked directly with that analyst, thus knowing exactly what that person is capable of.

And for hedge funds, I think it's just about getting the interview. Once you get through the initial screening, it's a pretty level playing field.

9/26/16

I am front-office analyst at Lizard iBanking in NYC

Pls help

9/26/16

Thanks for posting this

9/26/16

"I'm sure angry high schoolers will want to say I'm wrong about all of the above, but whatever I'm over it."

Dude, you are so wrong! My Junior Achievement teacher says so!

9/27/16

Hey, a great post and certainly true for America (I work here).

However, if you are working in Europe and reading this - please keep in mind that America is very different to Europe. To sum up the main difference, exit opps are more flexible in Europe whereas it is more stringent in America. For instance, big 4 to PE in America? Forget it. Big 4 to PE in Europe? Very possible. This is just a simple example, but you get the idea.

9/29/16

2) the money in banking is as good as (if not better than) the vast majority of career track exits, especially on a risk-adjusted basis,

^this is perfect, my 2c below:

unless you think you can be a 9/10 or 10/10 in investing, you'll probably make more money in banking. still you could always do ib>>pe>>mba>>ib so net-net i think you get additional optionality with pre-MBA PE

9/30/16

The only thing not entirely accurate about this is that deal flow doesn't really matter that much. You're going to be interviewing ~6months into the job and honestly most people won't have very credible deal experience. What's important is how you spin what you've done so far and be able to craft a story around it to tell your interviewers from an investor's perspective.

10/2/16

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10/2/16