Why do Consultants Perform Better Than Investment Bankers in PE Interviews?

Finance Career Info,Finance Jobs

We had a mentee evaluating pursuing an analyst role in investment banking or going down the management consultant path — when asked what she wanted to do more long-term, private equity came up. The reality is, other than large, large megafunds (Apollo, Blackstone, Carlyle, KKR, even TPG now has been known to be looking at hiring consultants) — you can get into a proper upper-middle-market PE shop quite nicely from management consulting and investment banking alike.
Consulting tends to be the less painful way to get there, so why not evaluate that option?

Consultants are tasked on a project-basis and bankers are generally tasked on a deal-basis (with a lot of project work in between). Consultants tend to have “beach days” where they aren’t tasked on anything and are waiting for work. Bankers will be given “busy work” in-between, not giving them the opportunity to take a break. Many bankers are running around putting out fires, and consistently backed up with work, while consultants on the other hand can actually take breathers and study for PE interviews. Does one place better than the other? Well, it depends what type of firm you’re going for.

The reality is that consultants have more time to step back, figure out what type of firm they want to get to, and prepare appropriately. Most bankers that we have interacted with over the last 2 years, (sad to say this) have been taught to run around and put out fires and not step back and think about what they’ve been doing, as part of the bigger picture. Bankers have been taught to be more analytical, which is something that consultants have to learn when they start pursuing PE Recruiting. While an analytical mindset is great, anyone can grow this skillset but not everyone can step back and understand the big picture within a case study or discuss macro-environmental factors within an industry.

When we composed an anonymous survey on hours worked, many bankers logged 70+ and many consultants logged <60. Is the reason why management consultants end up performing better on interviews because they have more rest time and can focus more on interview prep? Maybe.

Another point from our Management Consulting mentees — they’re spending the majority of their time working with top firms in due diligence (aka getting direct exposure as to why or why NOT a X firm bought Y company). Sometimes the most senior people at the firm are on the line and that exposure gave them insight into:

  1. How MFs and others get comfortable with an investment thesis
  2. A culture fit, which allowed them to understand firms at a closer level than some bankers do

Another one of our Management Consulting mentees reiterated these points as he told us that he had more time to prepare case studies, he interacted more with clients to develop his interpersonal skills over his banking buddies, and had a TON of practice building models from scratch (10-40 tab models). Working in consulting allowed him to have more free time vs. his banking friends who generally interacted with clients directly less and did more templated models because they were consistently running on fire-drills never being able to really OWN a process.

Growth/PE Firms that have hired Management Consultants/are hiring Management Consultants right now:

  • Advent International (latest fund: $25 Billion, AUM: $100+ Billion)
  • AEA ($4.8 Billion, $17+ Billion)
  • Bain Capital ($11.8 Billion, $160+ Billion)
  • Berkshire Partners ($5.8 Billion, $16+ Billion)
  • Clayton, Dubilier & Rice ($16 Billion, $43+ Billion)
  • Francisco Partners ($9.7 Billion, $25+ Billion)
  • General Atlantic ($7.8 Billion, $84 Billion)
  • Golden Gate Capital ($4.7 Billion, $19 Billion)
  • Hellman & Friedman ($24.4 Billion, $80 Billion)
  • Insight Venture Partners ($20 Billion, $90 Billion)
  • New Mountain Capital ($10.2 Billion, $35 Billion)
  • Sycamore Partners ($4.8 Billion, $9.6+ Billion)
  • TA Associates ($12.5 Billion, $45+ Billion)
  • Thomas H. Lee Partners ($5.5 Billion, $18 Billion)
  • TPG ($24.5 Billion, $120 Billion)

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