Private Equity: When to look for the boarding gate?

The private equity series is a collection of articles written by Quentin, MMO member who moved from consulting to private equity through Movemeon. We distribute our new content (like this article) on Linkedin. Follow us and never miss out on insight, advice and events. Or you can register to gain access to our weekly newsletter.You can find the others articles of the series here:

• All private equity funds were not created equal
• 29 questions you should have answers to before accepting an offer
• 12 usual activities of a private equity associate
• The double-edged sword of working in private equity
• 9 principles to help you break in

 Deciding to set sail for the world of private equity (‘PE’) is unfortunately not enough to get a role in this industry. The job market remains highly competitive in this area and, as for any investment. A PE firm will only hire someone if it believes the value the new member adds is (much) greater than its cost. As a strategy consultant, there are nonetheless a handful of clear windows of opportunity where your experience and your skill set make you a ‘good bargain’.

In a nutshell, the role you aspire to will be the key driver of your timing. To summarise, there are three main paths you can follow:

• Become part of the deal team as an investment professional. This is the most common decision and here the answer is actually relatively straightforward. You should aim to jump ship as early as possible. Indeed, the skill set you will typically develop in consulting is of limited relevance for PE. Thus, the longer you wait the more significant the skill gap with investment bankers (competing for the same jobs) will grow. That being said, almost all PE firms tend not to hire anyone with less than 2 years of experience. A good way to make the most of this period is thus to join a ‘private equity taskforce’, i.e. a ring-fenced team dedicated to executing strategic and operational due diligences. Many of the largest consulting firms do host this kind of structure. In any case, applying for a deal team role will require you to bridge the skill gap that will remain in spite of everything, in particular with regards to financial modelling and structuring. A word of caution though: this path is clearly ‘high reward but high risk’ in the sense that your task force experience will represent a competitive disadvantage if you ultimately decide to change your mind and follow a more traditional corporate path after your time in consulting.

• Join the operations team. Over the last few years, the largest PE houses have created teams that focus on strategic and operational aspects of the due diligence and/or the investment management processes. KKR Capstone, Bain Capital and Clayton Dubillier & Rice are often quoted as pioneers on that front. The operational team should offer a complementary skill set compared with the one in place within the investment team. As a consequence, PE firms are particularly looking for professionals with a total of 7-10 years of experience mixing consulting and operational roles, although the latter is optional. In practical terms, you could envisage to either progress your consulting career up to the stage of Principal or leave once you are a Consultant/Project Leader and join a company, either in a strategy or a line management role. Paradoxically, being a Partner decreases your market value since PE firms are interested in project managers – not sales persons.

• Act as senior adviser. PE firms often rely on pools of very experienced industry professionals to set their Boards of Directors and to possibly fill a vacant CEO role on an interim basis. Moreover, former executives tend to have created a quite distinct network which will nicely complement the one deal teams have. This thus leaves the door open for a “Partner + CEO and/or Board member” path – not the shortest or the most straightforward I have to admit.

Conversely, you can identify periods of your consulting career when a transition to PE will be sub-optimal, if not impossible. Most notably, an experienced consultant on the verge to being promoted to Project Leader suffers from the worst of two worlds: too experienced (with the wrong kind of experience) and too expensive to become a deal professional but not proven enough to manage people and projects as part of an operations team. This general framework should not occult the fact that each PE firm has its own idiosyncrasies and that the best way to prepare for a transition to this industry is to meet as many people as possible within the environment you target – refer to my first post to narrow down your search. In any case, the sooner you start this process, the higher your chances will be.