Investment Banking and Private Equity Differences

Hi there,

in general terms, I like to think of it as the “Sell-Side” vs “Buy-Side” of capital markets.

• Sell Side (Investment banks): typically advise corporate clients on large transactions, facilitate capital raising on both equity and debt side, advise on M&A, provide liqduidity to their customers and analyze, market & sell secruitities of various types or facilitate the latter.
• Buy Side (PE Firms): typically source and manage funds from their partners (LPs) / clients by making investment decisions in order to grow their assets under management and maximize risk-adjusted returns  

Hope this helps.

Regards, Andi

Hi there,

Investopedia is probably my favorite resource for this type of business terminology. Highly recommend you leverage it when building up your vocab! Here's their defition (which I think is very clear):

"Investment banks find businesses and then go into the capital markets looking for ways to raise money from the investment crowd. Private equity firms, on the other hand, collect high-net-worth funds and look for investments in other businesses."

Hi there,

Aside from what the other coaches have shared - adding a couple of nuances based on insights from my friends in IB/PE and some who have also made the switch from IB to PE

1. Context
   • IB → One important point is that IB is advisory, you are either selling (front office) or advising or raising capital
   • PE → you are actually managing / deploying your firms funds (on behalf of LPs)
2. ‘Lead generation/pitching' process
   • IB → involves originating clients and demonstrating network
   • PE → One of the key tasks that is distinct from IB is fundraising. You may pitch but it is quite different in the sense of potentially trying to convince private owners to sell/take on your capital (depending on your seniority), and often are very relationship / conversation driven vs ‘deck’ driven
3. Scope of work
   • IB → tends to be a fair bit repetitive in pitch decks
   • PE → principal investing hence DD is a lot more in-depth to affirm the thesis. Typically needs a keener sense on what constitutes red flags, and on the job you will have to deal with non-financial implications as well (e.g. HR, ops)
4. Salary
   • PE → you get carry
5. Hours
   • PE → rough but still slightly better than IB

Investment banking is a specific division of banking related to the creation of capital for other companies, governments, and other entities. Investment banks underwrite new debt and equity securities for all types of corporations; aid in the sale of securities; and help to facilitate mergers and acquisitions, reorganizations, and broker trades for both institutions and private investors. Private equity, on the other hand, is an investment business that uses collected pools of capital from high-net-worth individuals and firms.

Hi there, 

These are great questions to ask in coffee chats with people who work in these industries. 

Here's how to do it:

• Free Guide: How To Handle Networking Calls and Get Referrals

Aside from this, ChatGPT should also give you a great overview of the two (even a comparison if you prompt it).

Best,
Cristian

This is such a lazy question! You should have done some basic research before asking such open-ended questions here. Be specific in your question!