Management consulting to PE

Based on previous WSO threads, transitioning from management consulting to private equity (PE) is possible but comes with its own set of challenges. Here are some insights:

Commonality of Transition:

• Increasingly Common: While traditionally, PE firms preferred candidates with investment banking backgrounds, the trend is shifting. More firms are now open to hiring consultants, especially those from top consulting firms like MBB (McKinsey, BCG, Bain).

Challenges:

1. Skill Set Differences:

   • Modeling Skills: PE roles often require strong financial modeling skills. Consultants may need to bridge this gap as they typically have less experience in this area compared to bankers.
   • Autonomy: PE is highly autonomous, especially at senior levels. Consultants might struggle with the lack of structured guidance and the need to independently handle complex tasks.

2. Cultural Fit:

   • Work Environment: PE firms tend to have a different work culture compared to consulting firms. The environment can be less collegial and more professional, which might appeal to a different type of person.
   • Stress Levels: PE roles can be more stressful due to the high stakes and multiple responsibilities, such as managing portfolio companies and sourcing deals simultaneously.

3. Career Trajectory:

   • Risk: Moving from consulting to PE can be risky. If a consultant is pushed out of a PE role, finding another job in PE can be challenging, and stepping up a role is even more difficult.
   • Lateral Opportunities: In consulting, lateral opportunities are more abundant, and industry roles often line up to recruit consultants at similar pay levels.

Considerations:

• Operational/Strategic Consulting: Some PE funds, like KKR and TPG, have internal consulting teams. However, these roles are typically within mega-funds, which might not appeal to everyone.
• Feedback Culture: Consulting firms generally have a strong feedback culture, which can be beneficial for personal development. This is less prevalent in PE, where performance expectations are high, and underperformance can lead to being cycled out.

Conclusion:

Transitioning from management consulting to PE is feasible but requires careful consideration of the differences in skill sets, work culture, and career risks. Consultants should be prepared to adapt to the autonomous and high-pressure environment of PE and may need to enhance their financial modeling skills to succeed.

Sources: To all Consultants considering PE, Why consulting rather than private equity?, To all Consultants considering PE, Private Equity vs Consulting?, Q&A: Retired After a Career in Private Equity