Private Equity Associate
A Typical Day
Usually on Monday morning you’ll have a deal-pipeline meeting. That’s when the deal team gets together and talks about deals that you were viewing, deals that you’re live and active on, process updates, and discussing the performance of portfolio companies. So that's how you start your week on Monday just to get in the right zone.
A lot of your day is obviously catching up on e-mails - first thing in the morning - and then getting straight into things. Typically, you've got a lot of CIMs, or confidential information memos, that come in from bankers and intermediaries. You must sign on to confidentiality agreements to get those books, then you can start going through the review process. You start the due diligence, building the initial financial model to review an opportunity that you discussed amongst the group to determine if you (a) will bid, and (b) if you do bid what are you bidding and how you structure your deal.
I'll always have a few phone calls lined up during the day to talk to bankers and to talk to management of portfolio companies, just to get updates on the various things that we’re working on with those management teams. That’s during a typical day.
Every day you are reviewing deals and working on deals that are active. And you'll be responsible for maybe one or two portfolio companies that on the quarterly basis you'll have to provide assistance and valuation support for investor reporting.
Your day can be sort of all over the place. I can be doing a lot of stuff on e-mails, modelling industry and business reviews, constantly meeting with direct reports or team members, and talking about deals with portfolio companies. It’s a bit all over the place but it can be a typical day, depending on what you’re focused on.
The Expression of Interest
Everyday you’re reviewing books, and thinking about industries. In a private equity firm, it’s unlikely that someone at the associate level is researching industries and reaching out to companies. About 90% of the time you’re getting books to review a business for sale. The intensity of reviewing those during the early process - during the initial diligence — is pretty light. Then when you have an EOI - an expression of interest - you get a management meeting, learn a little more about the company, due more due diligence, speak to people in the industry and get smart. From that point - which could be a month or four-week process, but maybe a little more - if you are bidding high enough. you get to the LIO, or letter of intent. That letter would give you exclusivity to the company and you would be the only ones - although sometimes they might take one or two companies through to that stage - and that's when it starts to ramp up.
More interesting ongoing things would be the
co-operational involvement you have working with those management teams to help
them achieve the investment thesis that was set out when you're acquired the business.
For example, most days that I am working with some of these portfolio companies
a lot of the work I’ll be doing is on the corporate development side. This is often
M&A — finding tuck-in acquisitions and helping management teams make acquisitions.
You have to go out, make sure the financing is in place and help with legal docs.
That's when things get very intense, when you’re live on a deal.
An Active Deal…
To go through an acquisition these days, you’ve got to be very aggressive on timelines, you got to be able to close things quick, and obviously things are very expensive. So we at the private equity firm build incredibly complex, sophisticated, models with various scenarios built-in and have very complex structures built into them, financing structures and targets on return. Getting those together can take a lot of time. I can remember many weekends working until 2:00 or 3:00 in the morning, not necessarily in the office but certainly at home. But you’ve got to get things done and those financial models can take a while. It’s an intense process.
That can be especially true if there's only two guys working on the deal. You’re moving through diligence - financial diligence, operational diligence, market research. You’re working with the lawyers, working with the accountants, to get all that of stuff done. You’re making sure you're moving through the process and hitting your target timelines. You’re pushing management to get the information you need to get to a close. Then, once you're done your diligence process you move into your legal agreement.
If you’re bringing in co-investors, there will be shareholder agreements. You probably also need to negotiate creditor agreements. As most of the time private equity shops are doing leveraged buyouts, so they'll get some form of leverage to finance their deal along with the equity they provide.
Going through all of that is fairly intense. It can go back and forth and it can be any little small thing that can throw off the deal. You can just lose it after putting in a tremendous amount of time to get to the finish line. Often these deals fall apart at the eleventh hour. You’ve put in all this work and you're very close to closing, but for some reason something happens and the deal just dies.
There are probably about a quarter of deals that fall through at various stages. It’s rare for them to fall apart at the end, but it’s probably still around 10%.
My Best Advice to Pre-Private Equity Candidates
I think that probably the most important piece of advice in private equity — and in business in general — is just to keep networking and building relationships. You’ve got to get in front of as many people as possible. You have to presume that everyone in the business is smart, so it will be having those connections that will help you get your foot in the door and present opportunities for you.
In private equity, you have to be able to convince the guy at the other side of the table that you're the right partner for them to move forward with. That's a very hard thing to do when there's so much money involved and things are so competitive. Having that skill set as you get more senior, being able to build relationships and be able to connect with people, is an incredibly valuable asset to have.
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