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I am very familiar with Huron.

The reality is going from Huron to PE is severely limited - you would most likely have to only look at healthcare funds and even there you would need to look at the lesser known ones as the others have their pick of candidates.

Going into PE at this point would require an MBA. I would NOT recommend doing a part time or executive MBA, those are not great for MBB. Aim to go to a top 8 full time (2 year) program in the US and you will have a good shot at making it into PE.

Best,

Udayan

Hi there,

I helped a few candidates to prepare for PE interviews for the case part, the most recent landed an offer from Bain Capital.

The format you described is similar to the structure for a written case - I helped a good number of candidates to prepare for that format as it is common for some consulting companies as well. Please feel free to PM me for additional information.

Best,
Francesco

Hello!

Perhaps you are the same person than wrote the last post ;)

Given that you clarify what your long-term goal is, in this case Healthcare PE, I think it makes all the sense in the world to make this change and become and industry expert.

Other couple of things I would take into consideration in your shoes:

• Do you konw the poeple in both workstreams? This can make a huge difference
• Same with the career plans, are they anyhow different among the two of them?

Hope it helps!

Cheers,

Clara

It will really come down to where you want to be working and how selective you want to be with choosing which PE fund. Assuming you are referring to a deal team role, the good news is that there is a longtail of PE funds you can consider (e.g., mid cap energy fund) if you're open minded about the brand, but they will still be super selective (tier 2 to PE/VC is not common) and will usually hire locally.

1. If you are looking to change geographies then an MBA will make a big differrence. As you already know, PE/VC is super competitive and local where many like hiring top performers from top MBAs, who naturally tend to have a strong pre-MBA background as well

2. The general thesis is that you need to learn the PE toolkit asap from scratch which is partly why they like to hire early professionals (2-3 years of experience) but they typically say that a consultants ability to analyse a business holisitically (i.e., business DD) is a transferrable skill

3. I have interviewed at two of the firms you've listed where they all have a strong bias towards bankers over consultants. The interview is a mix of personal fit, technical questions, deal experience, investment thesis, LBO modelling test and sometimes a investment case study. The number of interviews can really vary where some will expect you to meet with the majority of people from that team across levels and all partners/MDs

4. For a consultant, it's really the accounting and finance basics behind an LBO model and ideally trying to get as much DD experience as possible so that you are good at developing an investment thesis

5. Much of the recruiting happens through headhunters so it's super important that they know you and see you as a strong candidate. Referrals do happen but are not super common unlike consulting and so I would focus more on the network building. The networking is most naturally done through alums of your company who have joined that fund - if there aren't any that's usually a sign...

6. Unless you are a US citizen or have prior experience in the US, large cap PE funds will not consider you as they already have a wealth of talent from IBD, MBB and top MBAs to pick and choose from

Hey,

Just wanted to make sure that you are covering all aspects. I pick up 3 distinct subjects from your question:

1. Valuation
2. Value creation
3. LBO

As you know, these are different topics (obvs all under the same umbrella) and will require different approaches. Hope that makes sense.

#1 is your typical valuation of a firm and am assuming you know this subject (NPV, shares outstanding etc) and how to approach such cases. #2 can be intrepreted as creating shareholder value or customer value. You can create more value by growing revenue and/or reducing operating cost and/or improving asset efficiency and/or improving customer experience. There are many other ways but I have summarised and simplified here. #3 is about valuing a company to acquire..am assuming you know this subject.

Feel free to shoot me a message if you wish to discuss further.

Hi,

Several points here:

• It's extremely hard to get the job in PE post MBA (the number of offers is lower than the number of candidates with pre-MBA PE background
• It's much easier for ex-consultants to get operational roles in PEs than investment roles. But even ops roles are hard to get
• After a sponsored MBA you have to stay for 2 years to pay back
• You have to learn finance and valuation if you want to work there. No one will teach you
• you should better get some DD experience right now at McKinsey. try to get staffed on these projects

Answering your questions:

• It's easy to transition to a PE operating group and hard to transition into deals
• TOP25 will not work. Its super hard even from TOP3
• Should be MBB

Best

Hi,

M&A Advisory interviews are different from consulting and are usually much more technical and detailed in the financial part. Usually, they give you much more time to prepare and do the valuation on paper. Depending on the company you'll need to:

• Find the relevant information in P&L, Balance sheet, CF statement
• Do the simplified valuation using NPV: calculate cash flows and make assumptions about growth rate and discount rate
• Do the valuation using comps - you'll have to explain which comps you will use and why
• Do the valuation of the synergies
• Play with different scenarios (e.g. how the stock-price will change if the deal terms leak into media, or how should the companies behave in a bidding process)

There are two types of frameworks you may use:

1. Commercial due-diligence of the target company
2. Synergies calculation of two merging companies

Note also that it can be a mix of both.

1. For Due Diligence you can use the following structure:

Market

• Size
• Growth rates
• Profitability
• Segments
• Distribution channels

Competition

• Market shares of competitors and their segments (see the next point)
• Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
• Unit economics of the players (Margins, relative cost position)
• Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

• Unit economics (Margins, costs) in current or target markets
• Brand
• Product mix
• Key capabilities

Feasibility of exit (in case of a PE company):

• Exit valuation
• Exit time
• Existence of buyers
• Risks

2. For Synergies Calculation you can use the following structure:

1. Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
2. Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
3. Financial synergies - working capital, capital structure, tax
4. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
5. Total synergies potential in $, adjusted by risk (probability of failure)

Good luck!

Hi Anonymous,

since all the experiences you had were internships, I would actually include the consulting one as well. You can easily build the story that you wanted to try different things to understand what is really interesting for you, and after doing both PE and consulting you understood consulting is the most suitable career path.

It is quite normal for people to have internships in different sectors to understand how they are before choosing a career path; so far that the brand name or the sector is fitting consulting, there are no issues with that. I myself did an internship in banking before consulting and that was totally fine for the interviewers.

The fact that you had internships in both consulting and PE and that you now want to start in consulting can actually be considered as a plus. Consulting companies appreciate candidates who are sure about consulting as a career path and the fact you want to go back after trying also other experiences can reinforce that belief.

Best,

Francesco

Hi,

I have helped 2 folks do this exact transition.Your best bet is to network to get a referral and then ask HR about which role you would qualify for. With 1 year work experience you will join as a 1st year BA it honestly is no big deal there are plenty of people in your position.

In terms of timelines - post referral it should take a few weeks to schedule a phone screen which is a 30 min case. Once you pass that its another week or two to schedule the first round and then about another week for the final round. There is a lot of flexibility in the process given that you are not applying as part of a class from a University.

Best,

Udayan

Hi there,

Thanks for bringing this question to the forum, it's a good one. I am no PE expert by any means, but I want to contribute to the thinking process here.

I would begin by stating that the question is stated in a generalized manner. PE can be broken down in its sub-sectors / sub-focuses, which entail its investment strategies: (a) venture capital; (b) growth capital; (c) mezzanine financing; (d) LBO; (e) distressed buyouts; (f) fund of funds. As such, a portfolio of companies for a PE firm will look very different based on the investment strategy. And the areas of focus when creating value will be different as well. Finally, the risk-reward relationship will be different, affecting the multiples. On another note, PE is different in different geographies. As such, it's difficult to provide a one answer fits all.

Next, let's highlight the ways PE firms create value: (1) exit (multiples arbitrage: buy cheap, sell expensive; IPO; sale; merger etc...); (2) operational and organizational efficiencies (i.e. profitability improvements); (3) financial engineering (capital structure, debt restructuring, tax improvements etc...); and (4) business growth. Based on the investment strategy chosen, the use of each value-creation tool/approach will vary in degree and focus. For instance, in a distressed buyout, the PE firm will likely benefit from operational efficiencies and the exit value after buying cheap, improving the business and then selling it. It will perhaps focus less on business growth since the focus will be to ensure survival > focusing on growing the business from day 1.

To conclude, I would like to make a final comment on the aspect of achieving the high returns on a portfolio of companies. The portfolio performance will be based on the risk-reward structure chosen by the firm, and will depend on how good the firm is at achieving its objectives. In finance, it's most important to remember that your financial performance is meaningless if not against a benchmark (or competition). Financial metrics are always meant to be compared to cost of capital, opportunity costs, required rate of return, industry benchmark, market expectations etc...

Hope this helps, and happy to discuss any points further.

Rakan

Hi!

1. Yes, there is a path to becoming a partner but typically this would be as an Operating Partner and not on the investment side. If you want to transition you will have to do this earlier in your tenure in the operating team.

2. There is a very strong trend towards building up operating teams and most of the large PE funds are setting these ups. The reason for this is that cheap capital is chasing fewer deals so just using leverage to achieve returns is becoming increasingly difficult.

3. If you consider joining an operating team, make sure to look at the incentive scheme and how it compares with the investment team. This will give you a good idea of the standing of the operating team in the fund. If radically different I would consider my options.

-A

.. Sorry, non that I know of which such an active and well-built community like here!

But you can find many forums dedicated to IB/PE/VC and also find people there offering coaching sessions on that - however not in such systematic way like on PrepLounge!

Hope that helps - if so, please be so kind and give it a thumbs-up with the green upvote button below!

Robert

Hi there,

Many consultants leave for PE - If you are good at DDs, it should be fine. (at the end of the day, PEs are in the business of valuations and deals - so you already have 50% of the business requirements) - the other 50% is relatively easy if you are interested in it. It's really not more than simple additions and subtractions (except for leveraged buyouts, those can be confusing sometimes :))

The technicality of the job should not be a showstopper - just remember how much you learnt on the job in your current company. The question you need to ask yourself are the following:

• Are you ready to leave consulting?
• Does PE fit with your mid-term/long-term plan (you don't need to have a plan, does PE fit with the overall picture you have for yourself 3-5 years down the line)
• Does the job offer you the lifestyle you would like to have?
• Do you think you can work well with this PE team?
• Does the job offer you a career ladder that is in line with your expectations?

Also, it never hurts to go through the interview process to discover the role a bit more and your "valuation" of this position might improve ;)

I hope this helps - Best of luck in the process!

Khaled

Hi Anonymous,

congratulations on your offer! In terms of the job expectations, you will mainly have to work on due diligence (usually 4-week period projects) to assess if an acquisition makes sense. This normally involves industry analysis (including analysis of market potential, competitors and customers), target analysis (business plan assessment) and synergies analysis (potential revenue/cost gains) to assess if the acquisition makes sense based on the goal of the PE (usually, an exit in a certain number of years for a certain multiple).

In terms of preparing in advance before you start, I would recommend working on technical, communication and stress management skills.

• On the technical side, Excel will be the most important technical thing to master at the beginning, in particular for VLOOKUPs and Pivot tables; you could also review PowerPoint, which you will also use quite a lot.
  • At BCG we got learning courses we could use to improve on them, and you may receive the same for your target firm, but so far that you have already mastered the skills before joining (you can find several courses online for both), even better.
  • Tip for Excel: learn how to use as much as possible the keyword and relegate the touchpad to the minimum – this will skyrocket your productivity in the long term. Some computer programs such as KeyRocket provide tips to improve on this.
• For what concerns communication, I would recommend the classic book on the topic: “How to Win Friends and Influence People” by Dale Carnegie.
• For stress management, I would recommend two books:
  • “The Miracle Morning” by Hal Elrod – great tips to start in the right way your day
  • “The Magic of Thinking Big” by David Schwartz – a great sum up of some of the best tips be positive, productive and achieve more

Below you can also find a list of things that could be useful to practice during your first weeks:

1. Take notes when your manager tells you something – this will help you to remember details and will show you care about them to the team.
2. Always double check. The first impression is very important in consulting: if you show you are reliable from the beginning, you create a reputation of a reliable person. Double checks should be done on expectations for your job, your excel analysis, your slides – basically everything.
3. Define priorities before starting any set of tasks. The majority of the results usually come from a subset of activities – this is true also for your tasks in consulting. You have to identify which they are and prioritize them – the application of the so-called 80-20 rule or Pareto Principle.
4. Socialize with your colleagues and start to build a network. Consulting is a people business and you should build a good network both within and outside the company. A good start is key to develop good relationships long-term
5. Organize your private life activities. You want to organize your calendar to leave some space for personal activities (sport/ friends/ family). This is not easy but can be managed if you organize well, and long-term will be critical to keep a balance between work and private life. Also, it is better to align with your manager/teammates from the beginning on your core needs, so that there are no surprises later on.
6. Ask for feedback every two-three weeks – this will show you are proactive and willing to learn.
7. Ask for help when you don't know what to do – better to let know you are in trouble with meeting a deadline then missing the deadline.
8. Be social and respectful with the support staff – these people are great and influential as well in the company.

Hope this helps,

Francesco

Many (if not all) PE funds would consider applicants from management consultant firms. They generally like the idea of having applicants with a diverse background and can think about problems in a different way than the typical finance kid. That being said, the fund will expect that you have roughly ~80% of the technical financial skills that an applicant coming from a traditional banking background would have.

You may need to devote a little time self-studying the basics. Here is a list of topics to cover and an intermediate level question you could expect in an interview (though they can get significantly more challenging based on the interviewer)

1. Accounting skills: basic understanding of 3 financial statements
   1. Ex: if you sell $10 of inventory for $20 and no cash is collected today, how would impact the 3 financial statements?
2. Financial skills:
   1. 1. Understanding of key financial concepts: equity, debt, enterprise value, WACC etc (ex: how do you calculate the average cost of capital? //what is this number used for? // if we increase the amount of debt on a company, what happens to WACC
      2. Understanding of valuation methods (Comparables, Transaction Comps, DCF) and metrics (P/E, EV / EBIT(DA)) - calculation and applications
      3. Conceptual questions (ex: what sort of companies would you want to use EBIT multiples? // when would you use EBITDA as a multiple? Walk me through a DCF // what is the difference between levered and unlevered free cash flow?
   2. Modeling skills:
      1. Each fund will have you do a case study/modelling test in a later round. You should be able to build a basic LBO model from scratch, decently formatted in around 2 hours

This stuff is not rocket science and will not be overly hard for anyone who went to a decent college in a hard major. That being said, if you have little exposure to this information before I would assume that it represents roughly 1/3 of the volume of work required in a freshman level calculus class.

I would recommend the wall street oasis guide (WSO) or vault guides. They are well worth the money. The WSO guide, in particular, is helpful because they have lots of these technical questions at varying difficulties. I would suggest getting the guides because the questions I have listed above are fairly easy and you can likely expect questions that can be a fair amount more difficult.

Important note: Quotation from Quora

Hello,

Just to give a ballpark figure, typical Buyout-focused PE firms target +20% IRR over a period of 5 years, implying a Multiple on Invested Capital (MoIC) of at least 3.0x. Notice that the profitability of the underlying asset is not so important; it's more of an input to achieve that.

On the case you presented:

• ROI of 25%, thus MoIC of 1.25x is way too small
• A key driver of profitability is the exit value, which you are not considering.. and what is the entry price? or is it a greenfield investment? (usually a PE firm acquires an established company)
• Difficult to imagine a situation of annual cash flows of $2M and profits of $0.4M
• Aren't you mixing CapEx and annual costs? Or is it a coincidence they are the same? And CapEx of 4x revenues is huge

In a nutshell, I would not invest in this deal and I believe you are making too simplistic assumptions.

Best,

Francisco

Hello,

First of all congratulations on the move. Yes, PLs can transition to PE but I would advise on moving within 2 years. As a former BCG and currently working in PE, here are my 2 cents to maximize your chances:

• Know the whole recruitment process inside-out: role of Headhunters, paper LBOs, multiple rounds of interviews that cover fit, technical aspects & deal Exp. and cases
• Practice the aforementioned parts until you can answer them during your sleep
• Network as crazy - most people won't reply to your cold calls so you have to strategic in this approach and work with the sheer numbers
• Position yourself to do as many DD cases as possible and, if you're lucky, getting into the PE practice area helps quite a lot
• Firms hire, and increasingly so, people with exp. in consulting and will test you particularly if you are as technically sound as your IB counterparts. This means FInancial Modeling (vs. for IB candidates they'll test on strategic, structured thinking).

If you need any other hint let me know

Best,
Francisco

Hello!

Congrats on the offer!

Entering PE after a carreer of 2-3 years in McKinsey USA as a BA is something that many people do, so it´s easy if you follow the right path.

Actually, I know a person who worked with me in DD in 2017 who did precisely this in the US.

What you need to do is to make contacts in the PE practice asap, to ensure to be staffed in as many projects as posible. The way to do this is to find your first project in PE and ensure you rock it, to build a good relationship with the partners. Once you have achieved this, things will be easier, since all you need to need is express your interest in continuing your carreer in the practice and they will staff you.

However, bear in mind that PE and DDs are actually challenging and exhausting cases, you can´t do too many of those in a row without having a burnout.

Hope it helps!

Cheers,

Clara

Hi there,

The payback period is the time needed for an investment to reach a breakeven point. As a consequence, assuming the company is bought at the beginning of year one, you can simply check the sum of the inflows for profits and the expected selling price at that time would be at least equal to the buying price.

Best,

Francesco

Hi!

Here is how to be rigorous in your thinking:

1. You need to ALWAYS define your focus metric! Profitability is not universally defined. It is usually profit relative to something (mostly profit/revenue, but can also be profit/cost, profit/customer base or dozens of other versions). Clarifying what profitability means for this particular client is your duty as consultant (candidate).
2. Then you need to deconstruct this focus metric into its components and check, which one has changed in the direction wthat would cause the term to decline (nominator must have increased relatively to the denominator!). Then you drill deeper to isolate the numerical driver of this unfavorable change.
3. Once you know what is mathematically driving the decline in profitability, then you start asking qualitative questions to understand the underlying reasons for this decline.
4. After you understand the problem driver(s) and the underlying reasons, you are well equipped to outline strategic options to adress these very reasons.

Hope this is helpful.

Cheers, Sidi