A quantitative analysis of the transition to private equity from a strategy consulting background
The move from strategy consulting to private equity can be a difficult path so to aid the process we have put together this guide / analysis, which we hope you find useful. All of the figures and data came from real world profiles based on data gathered in our platform.
What kind of funds are out there?
The world of private equity has grown significantly (and become a lot more varied) 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 / growth funds, which invest across the company size spectrum. Although any market 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.
Which funds hire the most consultants?
To answer this question, we analyzed the incoming classes of 13 funds (Advent, H&F, Bain Capital, Permira, etc.) most commonly cited as "consulting-friendly". We crunched the data across c.600 junior profiles, primarily focusing on Associate or Vice President deal makers on the investment team only. Below is a summary of our findings:
In our panel of 13 funds, Berkshire Partners turned out to be the most Consulting-focused with almost 50% of their current associate class coming from Bain or BCG.
H&F, Advent, AEA and Bain Capital were also in the top 5 with 30%+ coming from MBB.
The variance in composition of the junior investment team is quite stark, with certain funds such as Marlin or CVC, reporting almost <10% of their current Associate class as ex-consultants
McKinsey does not have the best PE exits
Surprisingly, McKinsey turned out with to produce smallest amount of private equity investors with Bain & Co taking #1 place (48 profiles, 8%), with BCG taking a close 2nd (47 profiles, 8%). This may have to do with the nature of case work in each company, with Bain benefiting from their strong private equity practice and historic association with Mitt Romney's Bain Capital.
Absolute size of classes matter
From the point of view of recruiting, candidates also need to consider the absolute quantity of consultants that are hired in a given year, as a proxy for probability of being hired. The chart below shows the graph on absolute basis, highlighting just how large the intake class of Bain cap and Advent are in a given year. 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.
Companies mentioned in this article (click on each to see their org charts):