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The private equity series is a collection of articles written by Quentin, movemeon member who moved from consulting to private equity through movemeon.You can find the others articles of the series here:

• When to look for the boarding gate?
• 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

Many strategy consultants dream about one day joining a ‘private equity (or ‘PE’) fund’. Those three words seem to be surrounded by some form of magical aura magnified by the fact that, most often, consultants have a limited understanding of what the private equity world really entails. With approximately $800bn worth of transactions closed annually – the equivalent of 30% of the UK GDP –, private equity investments can actually take multiple forms. Listing those forms at a high-level is the aim of today’s post.The private equity industry has developed over the years and now constitutes a funding source that can be made available to companies irrespective of their development stage:

1. A nascent (or even not born yet) company can solicit venture capital (‘VC’) or seedCompanies may exist solely on paper and are almost never profitable at this stage. Venture capitalists are here to assess the future perspectives of entrepreneurs’ business models and decide whether they are ready to bet by buying a stake – often a minority one. The chances of failure are very high but the rare successes generate extremely high returns. Successful VC firms distinguish themselves by having the flair to identify great ideas – which explains why former entrepreneurs are very much in demand – and the network to hear about promising opportunities before they attract too much publicity. Analytics and valuation skills are of little relevance given that a VC investment very often comes down to ‘all or nothing’. One of the most famous examples of successful ‘all’ investment is the 10% Facebook stake Accel Partners bought in 2005 for $12m. This share today is worth more than 2,800 times more.
2. The fact that a company finally becomes profitable does not mean that it does not need further capital inflow. Managers may want to open new points of sale, enter new markets, enhance their IT systems, hire a new team etc. Revenue growth is the key area of focus. Banks may still be wary of lending too much and as a consequence existing shareholders may also turn to growth equity. Beyond money, these funds also provide expertise in business development and operations to ensure that internal processes are scaling up fast enough to support the expected development. Last but not least, growth funds leverage a network of senior advisors who can act as mentors and/or board members. Given the typical private equity investment timeframe (5 to 7 years), growth equity funds target fast-moving industries such as Technology or Biotech. TA Associates and Summit Partners are two famous growth funds.
3. Once a company has matured and is able to generate steady cash flows, it starts attracting leveraged buy-outs (‘LBO’) funds. In fact, the general public often tends to restrict private equity to LBOs, which benefit from more media exposure. Indeed, LBO funds manage the vast majority of assets devoted to private equity. Each fund has a different area of focus, typically consisting of a mix of industry, geography, company size and degree of involvement. But all LBO funds always rely on significant amount of debts to put pressure on the teams and ultimately boost their equity returns. To do so, LBO funds will rely on a mix of revenue growth and operations improvement – including cost-cutting. In terms of company size and type of issue, this is probably the form of operational work closest to the one offered by external strategy consultants. Depending on the total size of the fund, LBO firms are divided between small-cap (roughly under $250m), mid-cap (from $250m to $2bn) and large-cap. In this segment, you will find many of the behemoths, such as KKR, Blackstone or Carlyle. Within LBOs, funds investing in infrastructure assets are often categorised separately – motorways and retail companies have little in common. Funds such as Ardian (formerly AXA Private Equity) and Macquarie have developed expertise in that area.
4. Turnaround funds focus on companies in financial doldrums, either close to bankruptcy or even already under administration. Turnaround funds are very heavily involved and focus on renegotiating the financial structure of the portfolio company with existing creditors while fixing the company’s operations. Oaktree is probably the renowned.
5. Last but not least, some funds do not stand on the front line and prefer to team up with existing funds instead. This is the case of funds of funds – private equity funds whose investments are stakes of other private equity funds – and co-investment funds – funds which will buy a minority stake alongside a larger private equity sponsor. Since they are not in direct contact with portfolio companies, professionals working within those funds rely less on their operational skills than their financial abilities to ensure that they choose the right partner. LBO funds can decide to invest part of their commitments as co-investors.

The next post in this series will discuss the optimal timing for a strategy consultant to make a move to private equity. This timing partly depends on the type of fund that you are targeting. In the meantime, readers willing to discover more about the intricacies of private equity can have a look atPrivate equity demystified: An explanatory guide, written by John Gilligan and Mike Wright and freely available on the Institute of Chartered Accountants in England and Wales’ website.

The private equity series is a collection of articles written by Quentin, who moved from consulting to private equity through movemeon.You can find the others articles of the series here:

• All private equity funds were not created equal
• When to look for the boarding gate?
• 29 questions you should have answers to before accepting an offer
• The double-edged sword of working in private equity
• 9 principles to help you break in

A couple of weeks ago I had the opportunity to attendmovemeon’s Private Equity eventas a speaker. I found the discussion utterly interesting. In particular, I was surprised by how theoretical the image of private equity was in the mind of the audience. In many respects, this is normal – private equity funds do not hold workshops or Open House Days to help prospective hires understand how they operate in practice. Therefore, I thought it could be helpful to ‘raise the curtain’ and outline what the life as a junior in a PE fund could look like.The activities logically mirror the lifecycle of a portfolio company and, at a high level, we could divide them into two categories: ‘investing’ and ‘harvesting’.

THE INVESTING PHASE

It consists of discovering and assessing investment opportunities and purchasing the most promising ones. Practically speaking, the Junior Associate will assist with some or all of the following tasks:

• Sourcing investment opportunities by meeting with intermediaries (e.g. bankers, lawyers, consultants) and informally leveraging his/her and the firm’s network to discuss the latest industry trends and remain aware of the companies that may come up for sale in the short to medium term;
• Meeting sellers and management teams to establish the first interaction, introduce them to the firm and assess whether there could be mutual benefit in discussing a potential transaction. Unsurprisingly, sourcing and management meetings will require quite a bit of travel;
• Performing due diligence on the promising investment opportunities. Due diligences typically start as a ‘desktop exercise’ performed in-house, without any budget and therefore primarily relying on publicly available information and industry expert calls (the type of calls you would have already made when working on due diligences as a consultant). Appointment of external consultants are most often subject to Investment Committee approval and can cover a wide range of topics depending on the nature of the target: commercial, financial and operational are the most common areas, but you could also consider IT, legal, insurance, environmental and/or procurement & supply chain as worth an expert look. During the ‘deep due diligence’ phase, the Associate will coordinate and steer the various teams to ensure that they deliver a quality output on time;
• Estimating the expected investment returns using assumptions on future company performance and capital structure. This section is often referred to as ‘modelling’ and will eat a significant chunk of an Associate’s time in an investment process. Although the exercise can seem a bit daunting for novice consultants (who are not as well prepared as their M&A bankers counterparts), it becomes relatively systematic after a few months of practice. Expect nonetheless to spend more time than usual on this part of the job in the early stages of your PE career;
• Supporting and/or managing the investment process which includes modelling and Investment Committee memo preparation (see the two points below) but also advisor appointment, briefing and steering, sell-side meeting scheduling and preparation (including management Q&A sessions, site visits, meeting with vendor due diligence consultants etc.), term sheet negotiation (both with the seller through a SPA and with the future management team through a management equity plan) and closing process management;
• Preparing the Investment Committee memos (Word or PowerPoint documents) which will bring the Investment Committee members up to speed with the opportunity, the investment thesis and the progress made to date. Depending on the firm, the memos will be required at more or less pre-defined milestones throughout the investment process and will contain a more or less well-defined list of items (notwithstanding the length of such memos, which are expected to thicken as the investment thinking matures but still heavily depends on the firm’s culture).

 THE HARVESTING PHASE

It consists of making those investments bear fruits while ensuring that the firm and its investors are regularly updated about the company’s performance, achievements and potential issues. The jJuniorAssociate will be involved by:

• Supporting the creation and the implementation of the ‘value creation plan’(often known as a ‘100-day plan’), a roadmap jointly designed by the management team and the PE fund and aimed at agreeing on the key strategic and operational priorities which need to be tackled very early in the investment lifecycle in order to achieve the investment thesis. The management team is most often in charge of implementing the value creation plan, but the PE Associate may be required to monitor progress as PMO (very similar to a consulting assignment) and assist on key initiatives when required;
• Providing assistance to management throughout the investment holding period. The degree of involvement will depend on the Associate’s available bandwidth, the PE firm’s culture (some are more ‘hands-on’ than others) and the investment performance (companies in good shape require less attention). The PE firm’s expertise is particularly valuable to support add-on acquisitions since management teams may have limited M&A experience;
• Monitoring and optimising the financial structure of portfolio companies. To maximise returns on equity, PE funds load their target companies with debt and expect the debt to be repaid throughout the life of the investment. The optimal quantum of debt results from a trade-off between the ‘return on equity’ boost and the increased risk of bankruptcy (i.e. the company does not have enough cash to repay its bank commitments) or bank covenant breach (i.e. the financial performance of the company falls below certain thresholds contractually agreed with debt holders) leverage generates. The Associate is expected to continually ensure that this balance is optimal and suggest adjustments (typically dividend recaps or equity inflows) when required;
• Preparing internal reporting documents, which are typically circulated and discussed on either a monthly or a quarterly basis depending on the firm. These documents provide an update on each company’s actual financial performance compared with budget and investment case as well as a more qualitative view on latest developments.
• Preparing reporting material for limited partners (‘LPs’), who are updated on the performance of the fund (both at aggregated and portfolio level) on a quarterly basis;
• Coordinating the company sale process including an appointment of sell-side advisors, support in the preparation of vendor due diligence documents, organisation of meetings with potential acquirers and management of negotiation-related documents (e.g. termsheets).

I have not talked about work/life balance or even the relative importance of each of those tasks, for the very simple reason that those considerations heavily depend on the PE firm. In particular, some firms have built ‘portfolio groups’ which support deal teams in the commercial and operational aspects of due diligence and/or portfolio management; as a consequence, the investment Associate should spend more time on transaction sourcing and execution. Meeting people and asking questions are the only way for the prospective candidate to build a fully-informed picture.

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.

The private equity series is a collection of articles written by Quentin, who moved from consulting to private equity through Movemeon. We distribute our 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 other articles of the series here:

• All private equity funds were not created equal
• When to look for the boarding gate?
• 29 questions you should have answers to before accepting an offer
• 12 usual activities of a private equity associate
• 9 principles to break in

I would like to pursue this series of posts on private equity by debunking a myth which represents private equity as a ‘graal’ with only advantages compared with the life in consulting. Although life as a private equity professional can be considered as a ‘step forward’ in many respects, several aspects of the job may be worth considering before making a move to a fund (more on this in this article). The list is split into three categories: ‘pluses’, ‘equals’ and ‘minuses’.

PRIVATE EQUITY WINS

• Compensation. The package is often designed to attract investment bankers, who are better paid than strategy consultants. As a consequence, you should expect a significant increase in your total compensation package, up to 100% in some cases. Larger funds are usually more prodigal – the assets under management per head ratio grow with the size of the fund – but this tends to come with a heavier workload as we will see later on.
• Ownership. The role of a consultant is by definition to provide advice on a (most often) narrowly-defined topic. This role can be frustrating given that (i) the consultant usually does not know whether his recommendations were ultimately implemented or taken into consideration and (ii) the consultant cannot address an area for improvement outside the scope of work, no matter how promising and easy to sort out this area could be. Conversely, the private equity professional adopts a holistic view of the company and pragmatically works with management teams on the points which offer the best return on investment (both time and money). Incentives (through carried interest and management equity) should be designed in order to align interests.
• Adrenaline. Linked to the point of ownership, closing a deal which you have owned is much more rewarding – many professionals mention the ‘adrenaline shot’ – than closing a consulting project whose future is uncertain.
• Relationship with management. As a consultant, the management team is your client, and you need to seduce the team to rally them to your cause at the beginning of the project (otherwise you may face endless pushback to get the data you crucially need for your analysis) and to try to sell a follow-on project (ideally a massive implementation work) once the project is over. This partly explains why many talented Principals fail to make it to Partner: the nature of the job changes, from project manager to business development agent. Commercial considerations may consequently have an impact (even unconsciously) on the quality and conclusions of your work – if you solve all the issues in Phase 1, what will you work on in Phase 2? The private equity approach again goes ‘straight to the point’. During my 2 years at TowerBrook, I have never produced any PowerPoint document for discussions with management – back of the envelope calculations and Excel spreadsheets were all we needed.
• Timeframe. Consulting projects are squeezed into 4 to 8-week periods, a timeframe which is often too short to fully explore the issues in-depth and build truly open relationships with your counterpart – who often ends up the project half-traumatised by the speed of change and permanent sense of urgency. Private equity firms hold companies for 4 to 7 years and can thus enforce a slower pace – losing a day or a week is less crucial. The quality of relationships naturally improves as a consequence.
• Multitasking. Consultants work on one project at any given point in time, whereas private equity professionals frequently cover 2 or 3 portfolio companies – sometimes even more. In the latter case, you can pick your battles and produce the effort where the reward exceeds your cost (i.e. your salary). Conversely, consultants need to fill their diary even during project downtimes, which can give rise to low-value-added tasks – a waste of the consultant’s time and the client’s money.
• Exposure. As a shareholder representative, you benefit from even wider access to senior management compared with your strategy consulting experience – when you are a junior in consulting you mostly interact with mid-management, in private equity you can navigate throughout the organisation. Private equity also introduces you to Board meetings, whose dynamic generally represents a good learning experience.
• Exposure (cont’d). Being a strategy consultant enables you to meet a lot of individuals, but 90% of those individuals will be co-workers with the same type of background, the same concerns and the same professional aspirations as you. Trying to broaden your network beyond this circle is very often difficult: you do not have the time and little to offer to your prospective interlocutors. On the contrary, private equity is all about networking so you are encouraged to meet bankers, consultants, managers etc. and possibly source your own deals from day 1. Not only does it make the day-to-day experience more enjoyable, it also enables you to build an ‘intangible asset’ you will be able to use all your life.
• Career path. In big established consulting firms the career path is well established and predictable and everyone can expect to make it to Partner if his individual performance justifies it. In private equity, the performance of the fund as a whole, which you do not have full control on by definition, also drives career tracks. In one hand, a growing fund (in terms of assets under management) will need to reinforce its human structure and may create early opportunities for promotion. On the other hand, senior positions in a stable or declining fund are most often already filled by the ‘first wave’ of professionals. Given the low churn in this industry, a junior joining one of these firms will struggle to make it to the top – hence thorough due diligence is key prior to joining the firm, see one of my earlier posts on the topic.

PRIVATE EQUITY AND CONSULTING ARE EQUAL

• Variety of topics. Large consulting firms will provide juniors with an unchallenged width of experience. Within the first two years of your career, you could work on a reorganisation for a bank, on a strategic review for an oil producer, on a pricing project for a food retailer and on a supply chain mission for an automotive manufacturer. In private equity, you may end up investigating more opportunities but will only focus on a handful. Each individual should assess which approach better suits him.
• Level of issues. In both cases, you will deal with high-level strategic issues as well as operational concerns.
• Learning curve. Both environments offer an amazing learning experience with very few equivalents. Strategy Consulting will provide you with the tools to think about an issue, perform the relevant analysis and formalise and communicate recommendations in a simple but convincing way. Private equity will confront you with the real life of business and will overlay financial considerations – companies can only exist if they make a profit, there is no way around it.
• Travel. Travelling Monday to Thursday as a consultant is not fun, but private equity professionals are also very often on the road. Trips are usually shorter and more frequent, which means that you will probably spend more nights home but you may end up more tired.
• Work/life balance. In strategy consulting, you should expect to work relatively hard but the workload tends to be relatively smooth over time. In private equity, you can have very quiet periods followed by very intense weeks when your team is working on a deal. The ‘peaky’ nature of workload is similar to the one investment bankers face.
• Opportunities. Both worlds open a vast array of opportunities, although within slightly different worlds – consulting is more generalist and corporate-orientated whereas private equity tends to form a ‘self-contained’ world.

STRATEGY CONSULTING WINS

• Job stability. As mentioned earlier, in strategy consulting, if you do your job properly, you can build a career with high certainty. In private equity, external elements interfere.
• Chemistry. Consulting firms are made of hundreds of consultants, so the absence of ‘chemistry’ within a project team is not a big issue – the lineup will be reshuffled for the next project. In private equity, the team is rather small – 30 investment professionals at most, with a median of 5-6 – so the ‘human factor’ is key. The sword is double-edged: it can make your experience really great but could also spoil it in a very short timeframe.
• Variety of task. In strategy consulting, projects may have very different objectives and as a consequence, the approach the team will adopt and the nature of your own work as well as the tools you will use may completely change from one project to another. Conversely, the private equity ‘toolbox’ is more limited, although a good professional will learn to apply this toolbox to a wide range of industries and contexts.
• Training. Formalised training is something you will not get in private equity, so I strongly encourage you to make the most of the very well-conceived training modules during your life as a strategy consultant – even if it means waking up an hour earlier on a Friday to have time to finish your presentation before heading to the training room. Similarly, very few private equity firms have a culture of systematic, open and honest feedback as developed in many consulting firms. You should be even more proactive to ask for advice and guidance if you want your private equity career to be a success.

Again, this list only represents my perception based on my own experience and the numerous conversations I had with industry insiders. Each individual will have his own view, and each fund will offer its own ‘package’, hence I am obviously open for comments – comments which you can formalise by sending me a message on Linkedin.

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The private equity series is a collection of articles written by Quentin, 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
• When to look for the boarding gate?
• 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

Throughout this series, I have had the opportunity to cover the private equity industry from a number of angles. I have not however discussed how to get a job as an "investment professional", with particular consideration for applicants coming from a strategy consulting background - whose popularity in PE funds is growing. Here are a few personal principles that I hope you will find useful in your search.

The private equity world remains small, so openings are limited in number and competition is fierce

When you applied at McKinsey, BCG, Bain or any of the major strategy consulting firms, you did not have to worry about the availability of vacant positions. Given the size of these firms, you knew that there would be a role for you if you met the selection criteria, no matter when in the year you would send your application. Private equity is a niche industry in comparison. Only a handful of firms employ more than 50 investment professionals in London and the vast majority involve 10 professionals or less. So the first lesson to learn is patience. Looking for a job in private equity also teaches you humility: the competition is intense and thus your "success rate" will probably appear to you as desperately low - although at the end of the day you only need to convert one great opportunity.

Be proactive and open as many doors as you can

As mentioned above private equity firms are very lean and focus their energy and money on investing. Developing HR capabilities or a fully-fledged recruitment team does not represent a priority for them. As a consequence, openings will never be advertised on publicly-available job boards (or that is a worrying sign) but will instead spread through a limited number of headhunting firms (such as this one) and/or through word of mouth. Last but not least, private equity firms may hire a strong candidate even if they are not actively hiring. Given the financial leverage (i.e. the amount of money you will have an impact on as a professional) a high performer will "always pay for himself". The conclusion is clear: you need to be proactive and not be afraid to reach out to your network and firms directly.

Look for the mutual connection and avoid "cold emails"

As a corollary of the previous point, private equity firms pay a lot of attention on the "personal and cultural fit" when they recruit an addition to their team. In tight-knit environments, a bad hiring decision can prove costly, not only financially but also in terms of team morale. Consequently, you can greatly enhance your chances by connecting with the fund through a mutual connection that will be able to affix his/her "stamp of approval" on your work ethics instead of sending an unsolicited email, no matter how tailored it could be. Thanks to LinkedIn it has never been easier to get an overview of your connectivity with any corporation on the planet. Make an extensive use of that tool!

Prepare for modelling

A typical interview process at junior level will involve one LBO modelling test, one investment case study (often derived from the modelling exercise) and a series of "traditional" interviews. Even if you were part of the private equity "taskforce" and spent two years performing due diligences as a strategy consultant, LBO modelling and investment case analysis are two concepts you have never tackled in your career, so you need to prepare for the first hurdle. A number of books will do the job perfectly, for instance, Rosenbaum's Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions.

Do your due diligence and adjust your pitch

Although you will always apply for an "Investment Associate/Executive" role, you will never face two similar situations. This is another difference with consulting where the operating model has been largely standardised; in PE, this is still "work in progress". And yet, to optimise your chances of success you need to ensure that your pitch resonates with the firm's strategy, values, culture etc. You should avoid saying "I am specialised in healthcare and financial services" if your target fund only invests in heavy industrial turnarounds, or "I like to spend time working with management on cost base improvement programmes" if it only takes minority (i.e; non-controlling) positions in high-growth businesses. As a consequence your pre-interview due diligence is crucial. You can use the questions for interviewers I have already listed in this blog as a guideline. You should complement this systematic view with a more qualitative approach and interview outsiders (e.g. former employees, investors, consultants) to better understand the firm's "investment philosophy".

Stress your qualities as a strategy consultant

An increasing number of firms have diversified their recruiting pool and have moved away from hiring solely former investment bankers. Simplistically, investment bankers bring "plug & play" valuation and modelling skills while strategy consultants usually have a better understanding of the underlying business models and can support management teams in the post-acquisition work. Private equity has become more and more competitive and achieving decent returns now requires more than pure financial engineering, hence the need for more ""hands-on" profiles. A vast majority of PE recruiters will be aware of that distinction and will know what they get and what they do not when they hire a consultant rather than an investment banker. Nonetheless others may be at the beginning of that journey still (you will answer this question during your due diligence by assessing the share of former strategy consultants in the investment team) and you may need to stress the aforementioned strengths and show that you are ready to make "the extra mile" to bring your modelling skills up to M&A standards (despite all your training, you will really learn about modelling once you work on a deal).

Be aware of the economic world we live in

Interviews may include questions such as "In which industry/country would you invest $10m/$100m/$1bn? Why?" or "What do you think of company X?", where company X is (most often) a large multinational. Following the news may be tough given your tight strategy consultant diary, but I can promise you it is a worthwhile investment, now and in the future. A quick read through selected RSS feeds from the Financial Times complemented with carefully chosen blogs (why not try mine for instance?) may help you back your answer and avoid damaging answers.

Build your "championing network" within your firm

If you work for a major consultancy, there is a high chance that your target PE firm has already worked or will work in the short to medium term with someone from your firm. Beyond the formal "reference check" process, your prospective employer may informally (and tactfully, hopefully!) ask one of your Partners about you if he happens to be working together on a project while you are applying.

Be ready to commit long-term

Private equity is a long-term game. You will only make it rewarding if you follow the life of a fund end-to-end. Intellectually, you will have followed a number of investments from origination to exit. Financially, carried interest can represent a significant boost to your compensation and is often heavily discounted if you leave before the liquidation of the fund. Unless the role is explicitly designed for a short-term experience (e.g. Associate programmes in some US funds), the "I am here to get an experience for 2-3 years and move on" card you could play in consulting will get you a red card in PE.

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PROFESSIONAL AND PERSONAL GROWTH

Start-ups are a great way to meet new people and to expand your network. Many existing companies have an established core of clients and vendors, but start-ups are always seeking new customers, vendors and strategic partners.

There is never a dull moment. You will continually meet new people and build great friendships and business contacts that will last you throughout your career, and the likelihood of one of those new business contacts becoming the catalyst that leads you to your next job is high.

Looking closer to home, since most start-ups are small, there is the chance to get to know your co-workers very personally and create a bond with everyone on the team. Working at a start-up is like being part of a close-knit family where you are encouraged to be yourself in order to realise your full potential. Positive company culture is at the heart of start-up companies.

SENSE OF ACCOMPLISHMENT

Being smaller and more personal leads to attachment, passion and vested interest. The exhilaration of being part of a successful start-up produces pride and a sense of accomplishment that is extraordinary.

The entrepreneurial nature of a startup undoubtedly creates a lot of passion which means you will be working with colleagues every day that have the same positive energy and excitement as you do. Everybody is focused on the same goal, to take the company forward and upward, because wherever that company goes, it will take you and your team with it.

LOTS OF LEARNING

However, perhaps one of the best reasons to join a start-up company is to learn. If you are unfamiliar with the industry, but you like what the founders are doing then don’t hold back.

A start-up offers a hands-on, multi-functional experience where you can take on great responsibility from the word go and working in close proximity with the founders. It’s an amazing opportunity to soak up their knowledge and experience. Furthermore, you can expect to get a lot of exposure to the intricacies of the entire business operation from the start. Such involvement is especially useful if you want to start your own company one day.

PROGRESSION

Lastly, as start-ups grow, you can grow with them. And that can be reflected in your earnings too. Not only might salary increase with the size of the company and your responsibility within it, but you might also become entitled to options too – the value of which can grow as the company succeeds. Remember it’s not long ago that Facebook and Google were ‘start-ups’ too.

Read our startup focused interview with fram^ & Smart Buddy

Thinking about leaving consulting? Be that for a corporate, a start-up or private equity, find out your post consulting salary potential.

Consulting skills are extremely transferable. You work with some of the most capable people in business. The skills you develop are highly sought-after in the job market. one of the most appealing things about a career in a consultancy. Consulting is a classic option for those wishing to keep doors open.

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There are many valid reasons why someone may wish to leave consulting. One example is senior-level consultants are paid between 10-30% less than their peers "in industry" - both corporates & start-ups. However it's certainly not all about the money and, indeed, for most people, pay will not be the most important determining factor (e.g, job satisfaction, work-life balance, etc). That said, making ends meet underpins going to work.

So when you are confronted by the option of leaving consulting - be that for a corporate a start-up or for private equity - there is no harm in understanding the likely impact of that decision on your earnings. So here goes...

Consulting vs 'industry' - short-term pain, long-term gain

The most common path out of consulting is into 'industry' (by that, I mean a large-ish national or multi-national corporate). Typically, consultants join strategy or project management-type teams before transitioning into more operational roles later down the line. The "short-term pain" is that, at more junior levels, you will earn less in a corporate than in consulting (Senior Analyst [-35%], Associate [-21%], and Manager [-8%]).

However, as you'll have noticed, the gap narrows as you become more senior. It reverses at levels above Manager - the "long-term gain" - where, on average, annual compensation is 7% more than in consulting firms. Moreover, if you’re leaving consulting for ‘industry’, you can expect additional elements of your compensation package to be likely available and open to negotiation.

In industry, LTIPs are important

The reversal described above is driven by the different compensation structures. In a large consulting firm at levels above Manager, 92% of total compensation is a 'cash' element (i.e, basic + bonus). In a corporate, it's just 73%, with the big difference being the value of share allocations. Another point of interest is that share allocations don't tend to kick in until you are more senior than Manager.

Shares represent 19% of total compensation at these levels and only 5% of total compensation as a Manager. So when you are considering an offer from industry, make sure you ask about / negotiate in a long-term incentive program (LTIP) which grants you shares.

Consulting vs 'start-up' - it's all about the equity

Over recent years, start-ups and scale-ups have become very popular destinations for consultants. With growth stage start-ups receiving 24.59% of applications. On Movemeon, jobs in these industries are the most frequently posted types of opportunities. However, you need to be realistic about what you will be paid. Start-ups cannot afford to pay the best salaries. Neither do they have to, thanks to their popularity. So the pay advantage of staying in consulting is even starker at junior levels than compared to corporates. At Manager level, for instance, pay in start-ups lags consulting by 20%.

That said, joining a successful start-up does pay back if you stick with it. At levels more senior than Manager, the value of start-up packages is 31% more than their consultancy equivalents (and 7% more than corporates). The make-up of those packages, however, is extremely complicated. Only 30% of the value in a start-up is realised as cash and 63% relates to equity. So if that's important to you (for example to pay your mortgage and meet all your monthly out-goings), staying in consulting or moving to a corporate will prove more "liquid", even if the total value is exceeded by a successful start-up package.

Private equity - a financial services-type bonus

PE remains a very popular option. But it's often assumed that salaries are higher than in consulting. This is the case to a certain extent, but perhaps not as much as you'd expect - in the 10-15% range at Senior Analyst, Associate, and Manager levels. Where there is a big difference is in total compensation. Managers average a ~60% bonus in PE versus a ~15% bonus in consulting. And whilst PE Managers rarely benefit from carry, the value of this at more senior levels is, on average 1.8x salary and/or the valuation of basic + bonus combined. If you are interested in a career in Private Equity, here are 29 questions that you should ask to ensure you make an enlightened decision.

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Many people use consulting to develop the foundational skills needed to progress into senior roles outside of consulting. The most sought after end destination is the ultimate owner on the Exec team - i.e, CEO / COO / MD etc.This event brought together CEOs who had either started their careers or spent a spell of their career in consulting. Here movemeon brings you the best advice from the wisdom they shared on post-consulting career paths. We've split their guidance into the themes we pulled out of the general conversation.

CVS & PREPARING YOURSELF FOR A JOB MOVE

• Market yourself: use your CV to present your experience in a way that suits the job you want – but remember not to cross the fine line between tailoring what you’ve done and simply lying.

• Show that you are interested in the job you want by preparing for it outside work. This will take time and effort, but it is the best way to gain skills above and beyond those required for and presented by your current role.

• Prove yourself to those involved in the decision to hire or promote you. If you want to work four days a week, show that you can do five days’ worth of work in that time. And if you want your boss to take a chance on you, ask them what it would take to get that promotion, then show that you’ve got it – or can learn it.

• It’s fine to take breaks. Sometimes longer breaks are better because they give you the time and distance you need to re-evaluate your priorities. This will help you decide where to go next, and how to get there.

PERSONALITY & ATTITUDE

• Don’t try to be the smartest person in the room – very few people are generous enough to like the smartest person most, and no one likes to be patronised. Be a decent person, try to get on with your colleagues, and, if you must show your insight somehow, ask the best questions.

• Always focus on learning, in your job and outside it – you are more likely to be promoted if you have a hunger for learning and want to grow; it’s not enough to be the best performer.

• Within limits you set yourself, take any opportunity that presents itself at work – be remembered as the person who is always willing to lead, help and be involved.

• Directly following from the above, learn to say no, and learn to say it without ruining your chances of being offered opportunities in the future.

CHANGING CAREERS

• Have the courage to stick to your ‘Plan A’. Most people know what they really want to do, but don’t even try . They think there is a magic one-step formula that some people know and others – those who don’t reach their goals – don’t. There isn’t. Figure out your aim, then take small steps towards it with every new career move.

• Don’t rush, and don’t worry about making the wrong career move. As long as you learn and grow in every new job, it is fine to have a lot of different jobs – but have a clear idea about the way they all fit when you apply for a new job.

• When you arrive in a new industry or company, remember to be tactful and humble. Don’t just tell others how to do a better job – chances are, your new colleagues have been in their jobs for a long time, built their lives around them, and will not take it well if you try to tell them that you know better.

• In the end, you’ll remember the people, not the salaries, bonuses and other monetary achievements. So invest in the people around you as you get ahead.

If you're interested in senior leadership roles or the stepping stone roles on the path to senior leadership, we can help. Joining the movemeon community (it's free) gives you daily access to opportunities it's impossible to discover elsewhere.

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Given the intense competition, receiving an offer to join a private equity firm is quite a significant achievement, and the temptation to accept the offer as soon as you receive it without having done any proper due diligence is thus huge. Overlooking this crucial step of the job-hunting process can lead to serious disappointment in the future and the fast-moving private equity industry is no exception in that respect.

Below are 29 questions that you should ask to ensure you make an enlightened decision.

Fund strategy & positioning

1. How many funds and/or product lines does the firm operate?
   More and more Private equity firms are diversifying their activity to include hedge funds (i.e. public market investing) or debt vehicles. Each business line requires a particular approach and investment strategy. As a consequence, this can give you a feel for the variety of the work (in terms of investment type) that you will face. Beware though; like any organisation, a firm that spreads across too many lines is likely to feel a bit disorganised.
   
   
2. What kind of assets does the company invest in? There are primarily two types of assets in private equity: companies and infrastructure. Again, referring to the first post of my series, the nature of the work differs between those two environments.
   
   
3. What is the fund's investment strategy? Each fund will more or less strictly position itself within a spectrum going from "distressed" (i.e. underperforming and close to bankruptcy) to "glamorous" or "high-growth" assets. The price paid but more importantly, the type of work and situations you will encounter will depend on the strategy. In a distressed fund, you should expect to be involved in heavy restructuring and cost-cutting programs. In a growth context, you will spend much of your time finding ways to develop the business' top-line.
   
   
4. What is the size of the fund? What is the fund's sweet spot in terms of enterprise value or equity cheque? As mentioned in the first post of this series, the type of work you will do will significantly differ if you join a small-cap (<$250m roughly), mid-cap ($250m to $1bn) or large-cap fund. The equity cheque (i.e. the amount the fund itself invests in a given company) is intimately linked to the fund size since a fund will typically make between 8 and 20 investments as well as to the enterprise value sweet spot since roughly 50% of the acquisition price will be paid by raising debt.
   
   
5. Which stage of the company's lifecycle does the fund invest in? As mentioned in an earlier post, private equity funds as a whole cover the entire company lifecycle, from birth (seed or VC) to maturity (LBO). You should expect VCs to be more "gut-feel" based whereas LBOs require deeper due diligence and involve a significant amount of financial structuring (absent in VCs which very often can only raise equity).
   
   
6. Where is the fund present? Where does the fund invest? On one hand, a global fund will limit country-specific risk exposure. On the other hand, the more global the fund, the more you will have to travel - especially if the office network is relatively loose, e.g. only one office to cover the whole of Europe.
   
   Practically speaking, the geographical remit is defined in two ways. First, investors sign a term sheet that formally defines the areas where the General Partners (or "GPs", i.e. the members of the private equity firm) can and cannot invest. Second, and more importantly, GPs have their own "comfort zone", which is often a subset of the theoretically authorised area. This question is important for you as it will determine the amount of travel you can expect from this job as well as the extent of the cultural gap you may face when meeting with management teams.
   
   
7. What kind of industries does the fund invest in? The majority of funds are "sector-agnostic" and will invest indifferently in all industries. Some (most often smaller ones) have specialised in one or a handful of industries, typically Retail or Tech.
   
   
8. Does the fund do minority and/or majority deals? By definition, if the fund only does minority deals it will rarely be able to exert full control over the company and therefore you should expect more time to be spent on the due diligence - to ensure that the business "as it is" is a good one. This situation is relatively rare in private equity as opposed to hedge funds
   
   
9. Is the fund committed or raised on a deal-by-deal basis? A committed fund will offer more stability and less dependence on market conditions. Furthermore, a firm seeking investor funding on a deal-by-deal basis may feel the pressure to invest regularly to keep momentum with investors, even if the climate or opportunities are not optimal.

Track record

1. When did the firm raise funds for the last time? This question will give you a feel for the type of work you will be doing. If the fund is recent (less than 2-3 years), you should expect to spend most of your time sourcing deals and executing investments for this new fund. If the fund is older, portfolio management ("harvesting") should take a growing share of your bandwidth.
   
   
2. Has the firm raised more than one fund? First-time funds can appear attractive because of their entrepreneurial nature and their subsequent potential. If the first fund is successful the second will be larger and the team will grow, potentially creating "upward gaps". However, growth in private equity is more often achieved through external hiring rather than internal promotion, so you should always consider career upside potential with a bit of caution.
   
   
3. How does the actual fundraising amount compare with the fundraising target? In the current environment, with liquidity being more than abundant, a fund not meeting its fundraising target has run out of favour with investors and such momentum is very difficult to reverse, so I advise you to stay away. Some funds exceed their target, but many will stop when they reach it in order not to overstretch their teams.
   
   
4. How does the latest actual fundraising amount compare with previous actuals? Fund growth is a clear indicator of momentum and expected team size evolution. In particular, if the firm has been raising a decreasing amount of money, it means investors are less and less convinced and, unless the firm manages to come up with a series of mind-blowing investments, you should expect the trend to continue and therefore the team to keep shrinking.
   
   
5. How have previous funds performed? Given the illiquid and long-term nature of private equity (funds have a 10-year lifespan), it takes time for struggling funds to be entirely wiped out of the market. An early indicator consists of benchmarking the latest funds' IRR. If those IRRs are disappointing, it will only be a matter of time before investors are free to switch their funds to another destination.
   
   
6. Has the fund made recent investments? A fund may decide to slow or fasten its investment pace depending on market conditions. However, a fund that has not put any money to work over the last 18 months is more likely struggling to source interesting deals and this should raise a flag.
   
   
7. How fragmented is the Limited Partner (or "LPs", i.e. investor) base? I am always concerned with "one-LP" funds where one investor has the practical right of life and death over the fund. I believe this not only creates uncertainty about the future of the fund in case of headwinds (both at fund and investor level) but also there is a risk of seeing the LP interfering with investment decisions (creating useless friction).

Operating model

1. How large is the firm globally? In London? A classic question. All funds started with very small teams and an entrepreneurial spirit, but some have grown so much that this early flavour may have disappeared quite significantly.
   
   
2. Are there other offices? If so, where? Where are the headquarters? What is the role of London? The worst case for you is to join a US-based fund which considers London (and Europe in general) as non-core to their strategy and as such does not give you a lot of consideration and does not involve you in the investment decisions. Fortunately, London is a strong financial place and such situations are rare (at least rarer than if you were applying in Paris or Madrid).
   
   
3. Are there investment committee members based in London? Building on the previous question, a negative answer will likely indicate that the office has been primarily set up to perform local sourcing and execute deals when told by the headquarters, which reduces the amount of autonomy you will enjoy and subsequently the interest of the job.
   
   
4. How is staffing decided? Are there teams dedicated to particular geographies/industries/product lines? This question will help you assess whether you are going to develop particular expertise or whether you are going to remain quite a generalist. Both approaches have their own pluses and minuses, but in any case, you would like to ensure that your prospective employer does not plan to specialise you in an industry you do not fancy.
   
   
5. Is there a dedicated operations team? If so, how large is it, what are its remit and background? If an operations team exists, you should expect to be consequently less involved in commercial and operational aspects of the due diligence and/or portfolio management.

People & culture

1. Where do people come from? PE professionals typically come from a mix of investment banking, consulting, accountancy/Transaction Services and Corporate. The way of approaching investments is influenced by this background.
   
   
2. How would you define the fund's culture? Some funds have an American culture, which as a Frenchman I would define as direct and energetic, others have a more British inclination, softer and possibly more political. This does not mean that one is generally better than the other but you need to make sure that the culture fits your way of working and interacting with others.
   
   
3. How many (net) additions to the team have there been in the last 24 months? In the investment team alone? The "fund size evolution" question, should help you assess the momentum the firm is benefiting from. A shrinking team is almost always a bad sign - the fund is losing momentum or struggling to attract talents to fill the gaps.
   
   
4. How many people have left the fund over the last 24 months? If you exclude "defined-length" contracts (such as the Associates program), churn should be low: jobs in private equity are rare, and people tend to stick to their seats if their role is interesting and if they believe the firm has decent future prospects. If churn is high (say more than 30% of the firm was renewed over the last 2 years), at least one of the two previously mentioned conditions was broken.
   
   
5. Who are the senior sponsors of the fund? Each private equity fund is chaired and/or advised by highly respected individuals within the investment industry. Such personalities act as a stamp of approval and tend to facilitate fundraising. Conversely, you should proceed carefully with not or weakly endorsed funds.
   
   
6. Can I meet the rest of the team? Private equity firms are small companies and the personal fit is even more important than in consulting - imagine that you will spend many years working with the same people on a series of projects. I thus encourage you to meet as many team members as possible to assess this fit.

Compensation and career path

1. Who has access to carried interest? How is carried interest computed? Carried interest (i.e. the performance fee that general partners receive when their investments generate an IRR in excess of a certain threshold) amounts to a very significant share of your compensation, especially at senior level. Always useful to know when you will be entitled to receive a share of the pie. Most often carried interest is computed and shared at fund level; however, a few funds (e.g. CVC Capital Partners) are famous for their "deal-by-deal carry structure".
   
   
2. What is the typical career path? You need to understand whether there is a "glass ceiling" that you will never be able to go through. Many US funds have formal fixed-term Associate programs which imply that you will need to leave after 2-3 years. Other funds may encourage investment professionals to leave once they reach a given tenure if there is no room for additional senior managers or partners. In any case, you should feel free to ask for specific examples.

FAQs

1. What are the potential drawbacks or challenges associated with joining a private equity fund that has recently raised funds (less than 2-3 years old), and how might the job responsibilities differ in comparison to joining a more established fund?
   
   Joining a private equity fund that has recently raised funds (less than 2-3 years old) may involve a greater emphasis on sourcing deals and executing investments for the new fund. This could mean a higher focus on building the fund's portfolio and establishing its presence in the market. The nature of the work may lean more towards the early stages of fund management, with portfolio management gaining prominence as the fund matures over time.
   
   
2. How can I assess the cultural fit within a private equity firm, especially considering the different cultural inclinations between American and British-founded funds mentioned in the post?
   
   Assessing cultural fit within a private equity firm involves understanding the underlying cultural dynamics, such as American or British inclinations. For instance, American cultures might be characterized as direct and energetic, while British cultures may be perceived as softer and possibly more political. You should consider your own working style and preferences to ensure alignment with the cultural nuances of the firm, as this can significantly impact job satisfaction and collaboration.
   
   
3. In the context of private equity fund size and fundraising, what are the implications for my career progression and job responsibilities based on whether the fund exceeds its fundraising target, stops at the target, or falls short of the target?
   
   The fundraising performance of a private equity fund can influence career progression and job responsibilities. If a fund exceeds its fundraising target, it might indicate strong investor confidence and potential team growth, creating upward career opportunities. Conversely, a fund that falls short of its target may face challenges, potentially leading to a shrinking team. Understanding the fund's fundraising success provides valuable insights into its momentum and the trajectory of the team, helping candidates make informed decisions about their long-term career prospects.
   
   

Continue reading the private equity series:

• 12 usual activities of a private equity associate
• The double-edged sword of working in private equity
• 9 principles to help you break in
• All private equity funds were not created equal
• When to look for the boarding gate?

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