Answering Why Private Equity - 9 Key Answers

[quote=happypantsmcgee]//www.yjhypon.com/forums/why-do-ppl-choose-megafunds-over-…]

Thanks, but that thread is more about why megafund overMM。My question is the opposite.

Also, I am more interested in what is a good answer, rather than what the real reasons are (i.e. slightly better lifestyle, though not always the case.. especially at topMMfunds).

And most people in that thread say the work is pretty much identical betweenMMand megafund at the junior levels..so what can I say to an interviewer that is at least somewhat true and doesn't make me seem lazy.

。。maybe that I see more growth opportunities in theMM企业比大型股公司. . ?

CompBanker:

I've hit a lot on the "real reasons" why someone might chooseMMover Large Cap / Megafunds. Some of these also make for good answers (responsibility), while others make for poor answers (less hours). I'll try to take a different approach here.

You're currently at aBB。Try to think of all the reasons you DISLIKE working in such a large organization. Is it a lot of red tape? Do you hate having to report to twenty different bosses in five different groups, none of which talk to each other? How about the size of your deal teams? Do you like having responsibility for a small piece of a large transaction or would you prefer responsibility for a large piece of a small transaction? Try to think of which environment is most appealing to YOU and drive your responses based on that.

Having worked inMMIB/MMPEmy entire career, here are a few of my thoughts:

The most important aspect of any job is the people that you work with. Regardless of what work I'm doing, I enjoy it infinitely more alongside people that I respect and have built a relationship with. At a large organization such as a megafund, the large deal teams and structured organizational chart create a different work environment than one would encounter at aMMPEfirm. I prefer having a handful of colleagues over hundreds.

Early in your career, particularly in a pre-MBA role, there is tremendous value in learning as much as possible. At large private equity shops, your job function is typical reduced to a small facet within the deal process (for example, I know a person at a megafund who spent two straight years working with a single portfolio company to research and track the chinese transportation market). At smallerPEshops, not only do you get exposure to ALL aspects of transactions, you are given ownership over key tasks and play a meaningful role in the completion of the transaction. This increased exposure will put you leagues ahead of your peers at larger shops.

Similar to point number two, the "exploratory" work inMMPEis significantly less than it is at Megafunds. InMMPE(that don't have a sourcing model), you spend almost 100% of your time pursuing real transactions, and the volume is high. The typical associate can expect to personally review 50 to 100 transactions in their two years. They can expect to complete at least one platform, multiple add-on acquisitions, and potentially multiple sales. Right now, the mega-deal market is really struggling. Few multi-billion dollarLBOsare taking place. When you've got $20 billion of capital to deploy, there are a limited number of targets you can go after. Given the number of megafunds out there and number of associates at each fund, the odds of you getting multiple billion+ dollar deals done is pretty low. Sure, you may do a handful of smaller add-on acquisitions, but if this is the case, shouldn't you have just gone to theMMPEshop to begin with?

Finally, while deals in theMMare unlikely to make the front page of the Wall Street Journal, at the end of the day this has almost no impact on your life, particularly as a junior professional. The coolness factor of being the associate who drafted the funds flow for a multi-billion dollar merger wears off after a few hours. Having three extra 0's on the purchase price doesn't make you smarter or better looking. Your parents and friends aren't going to be impressed (you're likely to be labeled as a douche if you talk about work too much anyways). So unless you are trying to fulfill an inner need, doing larger deals really will not change your life.

And of course, there is the money. I'm guessing that excluding my carried interest, I still make less money than a pre-MBA megafund associate. However, the marginal value of money decreases more rapidly than you would think. I live in a penthouse suite by myself, have every gadget known to man, a fully paid for luxury car, a $30,000+ wardrobe, dine out all the time, take international vacations every quarter and weekend trips around the country month or two, and still manage to save my entire bonus every year. While I've never lived inNYC, which would obviously impact my cost of living, an incremental $100k/year would have zero impact on my standard of living. For those who plan on getting married and having kids they want to sent to private school: By the time you hit your early 30s with a couple of kids in private kindergarten, you'll be pulling in $500k/year inMMPEand will have no problem covering these costs.

The above probably sounds like a rant more than anything else, but there are very real benefits associated withMMPEthat I feel are often overlooked. When answering the question of "WhyMMPE," try to communicate how the benefits ofMMPEare meaningful to you personally. To the extent you can support it with examples of similar experiences you've had in the past, all the better.

You have carried interest as a partner I'm assuming? What did you make starting out as an analyst? Did you have to get anMBAbefore working at theMMPE?

Having your formerPEcolleagues as clients is just ... awesome!!

While I'm not inPEmyself, I've heard that there's this book that would really benefit you...

The Glocap Guide To Getting A Job In Private Equity

Look it up. I know they have a section on interviewing.