A quantitative guide to the transition to Private Equity from a strategy consulting background
The move from consulting to PE can be a difficult exercise, so to aid your career aspirations we have put together this analysis. All of the underlying data came from individual funds' websites, LinkedIn and other public sources and is available in our platform.
What kind of funds are out there?
The world of private equity has grown significantly since its "barbarian at the gates" days of late 80's / early 90's. Today there is a wide variety of private equity funds, ranging from listed mega funds to late stage venture and growth funds, which invest across the company size spectrum. Although any segmentation will have its inherent flaws, the most commonly used approach is the following split based on the underlying asset size:
Mega funds (Blackstone, KKR, Apollo, etc.)
Large cap (Bain, CVC, Advent, etc.)
Mid market (HIG, Abry, TSG, etc.)
Growth (TA, Summit, General Atlantic, etc.)
Late stage venture (Insight, Tiger, etc.)
Due to the differences in the diligence approach and the day to day work of an associate at these funds, the recruiting patterns tend to vary between these categories. For example, mega funds may prefer more blue chip investment banking candidates from bulge bracket banks, whereas growth and venture-focused funds may value entrepreneurial or tech background in their junior hires.
Deal team vs. Portfolio operations
Many of the larger PE funds have a dedicated portfolio team staffed with ex-consultants in order to oversee and manage strategic initiatives in portfolio companies. Consultants who join these teams tend to be more experienced (e.g., Senior Consultants, Managers, Partners) and bring industry expertise or some kind of functional depth (e.g., operations, pricing) to the table. The most famous (and arguably largest) of these teams is KKR Capstone, which has over 90 professionals and hires many ex-MBB consultants.
It is important to note that although technically still in private equity, these roles are different from the investment deal team jobs. Portfolio teams usually will work closely with the investment teams during due diligence to identify operational value creation opportunities and to develop 100 day value creation plans. However, their core focus is post-investment once the operational priorities are set. During this stage these teams will deploy in partnership with management to support major transformational changes within portfolio companies.
Which funds hire the most consultants?
To answer this question, we have considered a couple of lenses. Firstly we took a look at the aggregate hiring trends for the Top 20 mega funds / large cap funds globally (ranked based on AUM). In the below analysis we consider all roles (deal teams and portfolio) as well as locations (US + global offices):
The first obvious observation is the significant variance in hiring preferences between funds. Some of the mega funds (e.g., Brookfield, Apollo and Ares) employ an extremely small amount of people with consulting backgrounds - i.e., less than 1% of the total workforce.
On relative basis (as % of total), Bain Capital, Advent, Hellman & Friedman, EQT and Permira had the highest percentage of MBB alumni. This correlates closely with their recruiting preferences for a well-balanced junior intakes between bankers and consultants.
Bain Capital in particular, really stood out of the sample with close to 250 (or 20%) consultants in their ranks.
We have also analysed a subset of the mid-market / growth funds that are considered to be consultant friendly:
In this panel of Berkshire Partners, Altamont and Charlesbank turned out to be the most Consulting-focused with c.20-30% of their staff coming from MBB.
Despite higher percentages, it is important to note that on absolute basis the mega funds dwarf mid-market funds due to the sheer size of their employee base (and thus Associate intakes per year). E.g., Berkshire's 39 staff is significantly smaller than the 250+ at Bain Capital.
McKinsey does not have the best PE exits
Diving deeper, we have also considered the relative share of alumni be each firm. Our analysis shows that in total, McKinsey generates a larger number of private equity professionals (across all firms and titles), largely due to their bigger size (and longer history). However when we dive deeper into the composition of alumni by type and seniority, we find that BCG outperforms in mega funds and Bain significantly outperforms in Mid market funds (as shown below):
Absolute class size does matter
From the point of view of recruiting, candidates also need to consider the absolute quantity of associates that are hired in a given year, as a proxy for probability of being hired. This has obvious implications on recruiting schedules as some of the smaller funds may simply not hire in a given 2 year period, significantly restricting the probability of getting a job with them.
Next steps / conclusion
If you are serious about getting a job in private equity, two things are an absolute must-do:
Start reaching out to alumni of your firm who are currently in PE to set up a lunch, a beer or a coffee meeting to learn more about the career path. This is a great way to develop your network and to come across job opportunities in those funds.
When you are ready, get in touch with PE/VC recruiters (we have shortlisted the top ones for each geography in the link below) to signal your interest and register your CV in their CRM systems.