The points that stuck ou of our event: all funds are different, more and more funds are turning toward consultants for value creation, private equity funds are small teams in which you need to fit, the ‘how’ is more important than the ‘what’, work life balance is predictable, you’re only as good as your last fund, PE increasingly leverages freelance consultants.
At our last private equity q&a evening, we had the pleasure of welcoming 4 private equity professionals from a range of funds – all ex-consultants themselves – to share their experience about joining the private equity world. I chaired the q&a session of the panel and here’s the points that stuck out for me.
All funds are different
The fund sizes represented by the panel spanned from £350m to £3bn. Typically they were writing ~10 equity cheques from these funds. Thereby the deal sizes ranged from ~£20m (smaller deal in a smaller fund) to ~£500m (the opposite).
The smaller funds are also smaller teams. Commonly 10-20 people. They focus heavily on creating value through growth rather than financial instruments. This is also true of the larger funds today (perhaps not 10 years ago) but LBO modelling remains more central to the workload there. (All PE funds were not created equal.)
More and more funds are turning toward consultants for value creation
Good news for consultants here. “You can train a monkey to build models. You can’t train them to think and act commercially”. As finance has tightened post-2008, all funds have to do more to add value so are increasingly hiring the consulting skill set over the banking one (be that as permanent hires or freelance consultants).
PE funds are small teams – It’s all about fit
There is a common misperception among consultants that PE is a big industry. It may have a big image, but there aren’t many jobs available. As mentioned above, mid cap fund teams are commonly 10-20 people. So, what really matters when hiring is personal fit – between the candidate and the team and vice versa. You’re not going to get an interview if you don’t have the skills (these will be verified but if you have a solid consulting toolkit, you should be fine), so it really is all about fit.
It’s not the what it’s the how
Strategy consulting is generally about coming up with the answer – the ‘what’. PE has that too but it’s much more about getting the ‘what’ implemented successfully. This is traditionally the time when you’d step away in consulting. With successful implementation (to drive value creation) in mind, you really have to think carefully about how to work with the management team of the company. Imposing your brilliant ideas isn’t going to fly. It’s all about influence and sequence – it’s unlikely that the company will have the capacity of capability to get everything off the ground at once.
Work life balance is more predictable and more purposeful / ownership driven
There was a difference in the room on work/life balance vs consulting. Some thought it similar. Most thought it far better (in terms of pure number of hours worked). However, it was unanimous that the work was more purposeful. You are by definition a shareholder. With skin in the game, work is more rewarding (no slide decks getting dusty on shelves here).
You’re only as good as your last fund. So ask questions pre-joining.
The panel highlighted that lots of funds have wound up owning to poor returns from their last or current fund. There are lots of PE houses who had B or C rate performance in the near past and you should always ask this before joining. Simply put; poor fund performance means raising a future fund is hard if not impossible. There’s a great article here setting out 29 questions to ask before joining PE.
PE increasingly leverages freelance consultants
Since the teams are small and active value creation is vital nowadays, PE funds bring in freelance consultants to support the portfolio companies. They do this either to add capacity (i.e, a smart generalist) or to bring in specific expertise (pricing, digital etc). If you are thinking of leaving consulting, consider leaving now and working freelance. Movemeon is a great platform for discovering freelance consulting opportunities in London and all over the world.
If PE interests you, don’t overlook portfolio companies and the wider PE world
Since the primary PE investment market is small (in terms of jobs), you might also want to explore working within a PE backed business. The panel commented that these roles are very high impact and largely overlooked – because portfolio businesses (particularly of small and mid-cap funds) are rarely well-known employer brands. As such the roles available and the impact you can have in them tends to far exceed better-known companies. And if it all goes well, the comp will add up too. Beyond portfolio businesses, there’s the whole secondary market, specialist funds and also consultancies dedicated to servicing private equity. You shouldn’t overlook these either.
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