Are you a recent college or B-school graduate plotting a career in private equity? Our expert panel provides the career intelligence you need to understand an industry that’s not known for transparency.
This authoritative conversation features Michael Feiner, Head of Human Capital at Irving Place Capital; Ben Sanders, a Principal in Korn/Ferry International’s private equity practice; and Mark Emery, President of the U.S. Operations Group at The Jordan Company. Topics discussed: What is the right background and personality for a private equity career? How is headcount changing within private equity firms? Do you need to come from a “pedigree” school to break in?
This is an exceptional group to guide your private equity career: Feiner oversees firm- and portfolio-level human capital issues for a major private equity firm, following a distinguished career managing people issues in the corporate world; Sanders specializes in private equity for a preeminent search firm; and Emery leads an operations team, a group with ever-increasing importance in the industry.
Matt Malone, Privcap: Today, we're joined by Mike Feiner of Irving Place Capital. We have Ben Sanders from Korn/Ferry and Mark Emery from the Jordan Company. Welcome, everybody, to Privcap. Matt Malone, contributing editor at Privcap. We're here today to talk about building a career in private equity and, more specifically, launching a career in private equity.
Mike, so I'm wondering if you could talk a little bit about the different paths that people take to get into private equity at the junior levels.
Michael Feiner, Irving Place Capital: I think the most common model is for folks out of MBA school to go for some training in a bank for 18 to 24, sometimes 36 months, and then begin their quest for fame and fortune as they see it. I think that's pretty much the traditional path.
Malone: Ben, given your experience with PE firms, what do you see typically? Is that consistent with what Mike said?
Ben Sanders, Korn/Ferry: I guess the one thing I'd sort of build on that Mike mentioned is that oftentimes, it's people we see kind of going from your blue chip investment banking programs or strategy consulting programs into private equity pre-MBA. And then if they can sort of not going to business school-- if they need to go to business school and there are firms where they require them to move up, they'll go to business school. But oftentimes, it happens either just before the business school process or just after.
Malone: Are you finding the business school track to be the norm though among these folks when it comes to hiring?
Sanders: Not necessarily, I think because I think the industry is shrinking as firms are raising smaller funds. It's harder to get in post-MBA if you weren't in pre-MBA.
Malone: Mark, one of the things that we're seeing is firms looking for people with operating expertise. What does that mean for younger folks who are coming into these firms?
Mark Emery, The Jordan Company: On the operations side, we look for guys who've got proven operational experience. Particularly focused, there's three things we look for-- hands-on experience, delivered results, tangible results, and can work with our management team. So typically, we're looking for guys that may have an MBA, but they've got a track record in industry. Typically, the guys we bring in will have general management experience and particularly in being able to demonstrate results in that career. And we bring them in based on that.
Feiner: But they'd be coming in at senior levels I would bet at that point, right? Reasonably senior levels?
Emery: Reasonably senior, but we do bring in relatively junior guys who could be four to five years in their career on a pretty fast track. They want to come into private equity for a number of reasons, and then they could come in at a senior associate level, and then we move them up from there.
Feinder: And they'd come in on the deals side?
Emery: They'd come in on the operating side.
Feiner: On the operating side.
Emery: Operating side. And in the Jordan Company, we have a group called the Operations Management Group which these guys would come into. And they could come in with functional experience, for instance, a lot of supply chain, logistics, lean, finance, technology kind of backgrounds.
Malone: Is there are particular type of personality or skill set that works particularly well coming into private equity? Does it differ perhaps in the operation side and the deal side? I guess, what are firms really looking for out of less experienced hires?
Feiner: Folks in private equity are all smart. I mean, I think that's necessary. So they have great quantitative skills. I'm sure my colleagues would confirm that. I think what separates the real achievers is they are able to interact effectively with operating company executives. And beyond being good at the deal ratios, they just have a real good commercial sense or good commercial instincts for what makes a business successful. And that's quite different than being very good at doing the quantitative analytics that are important in assessing any deal.
Malone: Ben, what do you find to be the sort of desired candidate for these firms? Is there a consistent thing that you hear in terms of what they're looking for?
Sanders: I would echo 100% of what Mike just said, full stop. I think at the more senior level, so once we're sort of recruiting a principal or a partner, they're very much looking for a kind of recent deal activity where they've closed investments and you can see how those investments are performed at the partner level, especially, kind of how those investments have performed and the exit and how involved they were in sourcing. But in terms of the overall mindset and personality, exactly as Mike said.
Malone: Similar-- operations side, is there anything unique to that part of the business that would be different, say, from someone looking to work in a deal team?
Emery: I think the personality is very similar to what Mike and Ben mentioned. I mean, every private equity fund's different, the way they operate, but we, for instance, work without a 100 day plan. We work with our management who will have a three to five year plan. And our guys will work to help implement that with them and deliver the changes and the results to make that plan happen.
In other words, it's pull from management. We don't force our guys on the management teams. And that requires a kind of personality that management want to work with. So I think it's very much what Mike and Ben said. We want guys who are pleasant to work with, But most importantly, deliver results because our management teams will want to work with them if they get results.
Malone: When it comes to-- Ben, you mentioned younger people getting into private equity, making this decision, whether it's a transition to business school and then coming back to PE. For folks who don't start in PE, what tends to be a good type of experience to acquire prior to making that transition? And this is in the sort of early years in one's career. Is it banking? Is it getting some general management experience? Is there a particular-- Mark, do you have any--
Feiner: Again, I think most of the folks who I see coming in either have investment banking, sometimes hedge fund experience, usually banking experience where they go through an analyst program. And they, at that point, seek to get into the kind of track that was what has become very popular at business schools today.
I think as Ben mentioned, private equity is changing. It's morphing. It's harder to raise money. Investors, and LLPs are much more discriminating about where they put their money. So I do think the industry's shrinking, and I think that's going to put a premium on folks who not just are smart and have good analytics and good training, but really have that kind of commercial instinct, that kind of interactive skill.
Because as Mark mentioned, there aren't a lot of private equity firms that force themselves on their investments. They're there to advise, they're there to encourage. So I do think it takes a skill that allows even very smart analytically gifted people to ingratiate themselves with portfolio company management so that those companies want to help the folks from that firm. And that's a gift and a skills and a trait that not everybody has.
Malone: So would you say though that given the dynamics of the industry now, is it less attractive to young recruits given that maybe the glamour of the deal side may be shrinking a little bit? Do you find that the demand is still there? I mean, are young folks looking to get in.
Sanders: I'd say and we see it, but I also hear it from clients that they're not able to just unquestionably keep the best talent that they have. Hedge funds are I think more lucrative. And that's where people tend to-- that would be, I think, a private equity firm's top competition for the deal side.
Feiner: And I agree with Ben. That's actually what's happening. So for someone who wants to take the value investing program at Columbia Business School, their lifelong dream is to work for a hedge fund and focus on investing. But for someone who gets juiced up around finding the right deal, romancing the deal, and ultimately nurturing and scaling the deal, which is a different kind of skill set, I think private equity is still very attractive. And although I think there are fewer opportunities given the kind of shrinking of that space. I think it's a different person, actually.
Malone: In terms of junior level employees seeming to transition, say, to a hedge fund, what do you think PE firms can do to retain that talent? Are there things that you think could be done better that might be attractive to a junior level person that would help keep them on board?
Feiner: I'm laughing because I came from industry. I was at Pepsi or PepsiCo for 20 years. And I can't say that Irving Place Capital is like every private equity firm, but I hear stories. And the fact is, probably starting in the banking business is where many of these senior partners come from. These cultures aren't high-feedback cultures. And so I've encouraged and exhorted my partners to morph the culture so that they provide much more feedback much more frequently and much more early to junior people who desperately want it.
And I think it sounds simple and probably hackneyed, but junior people today want to know how they're doing and how they can do better. And I don't think private equity firms would claim that's their hallmark or their paragons of providing that kind of feedback. And I think that's one of many things that could be done to let talented private equity folks know that they have a career.
Sanders: I think one of the key challenges is a lot of people are attracted to private equity hedge funds, whatever, for the economic reward-- shorter term is better than longer term. And frankly, with kind of the growth in headcount of private equity firms-- so we talked about it used to be kind of all investment professionals at the firms and now there's operating partners and capital raisers and so forth. And then there's fee pressure from limited partners. That all kind of shrinks the pie. And I think that for many people who choose to go to hedge funds, it tends to be more of a financial calculation.
Malone: Lastly, you talked a little bit about excellence and achievement in terms of a candidate's attractiveness. Is this a pedigree industry? Do you need to go to a Harvard, have some training at Goldman Sachs to get into private equity? Or is that not the case?
Sanders: I think the answer is no, but most people have gone to those places. And I think the reason why is that I think schools and investment banking and strategy consulting firms tend to be terrifically adept at finding the best talent. And so it's not that-- certainly it's an easy signal to go to, right?
But it's not that necessarily those people are the best because they came from there. It's that they went to those other places because they were at the top of their class-- undergrad-- and went to the top, went to Wharton or wherever because they were at the top of their class. So it's that demonstrated pattern of excellence. But if you look at people who've come in from the operating side or the capital raising side, they've proven that they're excellent and decided to go into private equity and haven't been at those firms, per se.
Feiner: But certainly at the entry level point, I think smart folks understand that unless you can find the top 20% of the candidates from Harvard or Wharton or Stanford or Columbia, then you ought to get the top 5% from good business schools but don't quite have that luster, that persona. So recruiting for Pepsi a hundred years ago, I figured out unless you can recruit the top 15% or 20% from Harvard Business School, don't bother taking the bottom 20% because you can get better candidates in just about every other place.
Emery: I'd say for us on the operations side, all the guys we've got have got outstanding excellent academic credentials, some Ivy League, some not. But the thing that all of them have got is kind of persistence and drive to get a result, and that can come in many forms in terms of educational institution. But I think all of them have got that. Very driven, very focused individuals.
I had the good fortune early in my career to work at McKinsey which is an outstanding organization by any standards. And I would put our organization up against them in terms of the standards of the people, in terms of the drive, the coherence of the organization. I think it's as good as any organization I've worked in.
Sanders: And I would just add one data point. I would say for the high school senior who's deciding between Wharton and a good private school but by no means a top 50 school but they get a full academic package and that's the reason they go there, that's going to limit their opportunities coming out. But it's not going to kill them.