by Brian DeChesare Comments (47)

Exit Opportunities as a Post-MBA Investment Banking Associate: Impossible is Nothing?

Exit Opportunities as a Post-MBA Investment Banking Associate: Impossible is Nothing?

Impossible is nothing.”

But it might be something when it comes to exit opportunities as an Associate in investment banking.

Look at online discussions of this topic, and you’ll see words like “black hole” and “bottomless void” used to describe your options.

In reality, though, things are not even close to this abysmal.

There is a strong tendency for online discussions to veer into extremes: “X is impossible” or “Y never happens.”

But real life is more nuanced.

So even if you’re about to start work as a post-MBA IB Associate, you still have plenty of exit opportunities… IF you know how to find and exploit them:

Weren’t You in Banking for Life? How Did It Come to This?

Most interview guides, including our own, say that you need to show “commitment to a long-term career in banking” at the Associate level.

And that’s true… in interviews.

But bankers are not stupid: they know that despite what you say, there’s still a good chance that you’ll quit or get fired at some point.

Purely from anecdotes and personal observation, I would be shocked if more than 50% of Associates made VP, and I would also be shocked if more than 10% made MD.

So even if you want to stay in investment banking, you might end up needing an exit anyway.

Or, you might have planned for an exit all along: perhaps you wanted to do banking but you graduated into a horrible recession, or you changed your mind about your previous career too late.

Or maybe you wanted to move into buy-side roles all along, but you smartly focused on just investment banking at business school to maximize your chances of winning offers.

So if you’ve wanted to move into a different role for a while, or you’ve changed your mind more recently, what do you do next?

First Off: Don’t Believe It’s “Impossible”

The truth is, both Analysts and Associate – and even VPs, MDs, and so on – have access to the same exit opportunities: private equity, hedge funds, corporate finance/development, venture capital, and so on.

The main difference is that at the Associate level and beyond, you do not have access to a structured recruiting process for those opportunities.

So yes, you can still get into private equity… but don’t expect recruiters to line up and call you after your first 3 months on the job.

Perhaps you don’t believe me.

I anticipated your objection, so here’s how you can prove it to yourself: go to Blackstone’s website and filter for professionals who are in private equity.

By my count, there are currently 17 professionals with the title of “Principal” there. Of those 17:

  • 9 appear to have followed the “investment banking analyst to private equity” track (53%).
  • 2 appear to have started in consulting and then moved into PE (12%)
  • 2 were investment banking associates who moved into PE (12%).
  • 1 worked in the US Treasury Department (6%).
  • 1 worked at a normal company, and then did consulting (6%).
  • 1 worked in IB longer-term (10+ years) but it is not clear what his position was before moving over (6%).
  • 1 appears to have worked in private equity from the start of his career (6%).

Note that this analysis is all based on real people using their real names, as opposed to anonymous discussions or comments.

Here’s the point: “career paths” are fluid, and you should be skeptical of anyone who says that Transition X or Move Y is “impossible.”

Even at one of the largest and most well-known private equity firms, nearly 50% of professionals at the Principal level did not follow the “IB Analyst to Private Equity” route.

Here’s the 8-step process you can follow to do the same:

Step 1: Figure Out What You Want to Do

Focus is essential in lateral interviews and MBA recruiting, and it’s also critical here.

You are not going to have much success if you attempt to recruit for credit hedge funds, mid-market private equity firms, and growth equity firms at the same time.

You won’t have the time, and your background or current group may pre-dispose you for certain opportunities.

You need to narrow the industry and sub-industry first, and then add geography to maximize your chances.

“Mid-market PE Firms with a Consumer Retail Focus Based on the East Coast of the US” is a good place to start, but narrowing the geography to “New York” or “Boston” is even better.

If you have no idea what you want to do, you need to start reaching out to alumni in different careers, setting up informational interviews, and narrowing your options.

Step 2: Position Yourself in the Right Group

At the Analyst level, this point matters less because the path is more structured and any good coverage or product group will get you interviews.

But at the MBA level and beyond, you need an industry or deal focus to have a good shot.

You should push for the group that aligns most readily with your goals:

Some of this also depends on your pre-MBA background: even if your banking group has nothing to do with your intended exit opp, you could spin your way into it if your pre-MBA work experience is relevant.

For example, if you worked for a healthcare company and then moved into consulting and then ended up in the business services group, you could still aim for healthcare-focused funds.

Positioning yourself in the right group largely depends on your networking and internship experience; if you’re not in the right place, you should become an internal-networking fiend until you can move over.

One last point: if you’re interested in moving to a big company and doing corporate finance/development there, you’re much better off at a bulge-bracket bank.

As previous interviewees have pointed out, most people outside finance have no idea what “elite boutiques” or “middle-market banks” are.

Step 3: Make Your Move at the Right Time

Opinions vary on this one, but I think that earlier is better than later when it comes to quitting banking.

Of course, you also need deal and client experience to speak to, so you can’t join, leave, and move to something else in six months.

You probably need a minimum of one year of experience at the post-MBA level, and sometimes more like 2-3 years, to make this type of move.

This timing is especially the case if you did not do anything finance-related before your MBA. If you did, then you might be able to make the move earlier on.

These transitions are still possible at the VP level and up, but I don’t have as good a sense for the timing there.

This timeline means that you need to start preparing well in advance of your networking and interviews.

Yes, they will still give you case studies and stock pitches, though traditional “modeling tests” might be less frequent.

They will dig into your deal experience and focus heavily on the merits of each company as a potential investment.

Step 4: Target the Right Funds or Companies

In theory, you could end up at Blackstone or KKR or TPG after working as an Associate in investment banking for a few years… but it’s not terribly likely.

For buy-side roles such as private equity and hedge funds, you’re better off going smaller, and for corporate finance-type roles, you’re better off going bigger.

On the “normal company” side, bigger firms tend to hire more and recruit more actively, and $50 billion companies need corporate finance staff more than $50 million companies do.

But for PE and HF roles, you’ll be up against current and former IB Analysts, most of whom probably have better technical skills than you and a much better ability to turn copious amounts of Red Bull into all-nighters.

So I would suggest different filtering criteria:

  • New Firms/Funds: Your chances are much better if you get in just as a new fund is being set up. This happens all the time as financiers leave their roles, start new firms, and hop around.
  • Existing Firms That Are Currently Fundraising: In many, but not all, cases, a firm that’s currently raising a new fund is seeking to do larger deals, go after new industries, or do new transaction types. All of these require additional team members.
  • Current/Former Clients: Go back and find deals that involved financial sponsors, and reach out to them. At the very least, they know you and it won’t be a “cold approach.”
  • Industry Alignment: The same theme you’ve seen throughout this article.
  • Current/Former Co-Workers: Many bankers get frustrated and think they can start their own investment firms; the more daring ones even go through with it. If you know anyone doing this (e.g., through a friend in another group), your chances of getting hired go up.

You can set Google News Alerts so you don’t have to scan for news of new firms and fundraising activity.

For example, if I search for “private equity fundraising” on Google Alerts, I get this article about Genstar and FFL Partners both closing funds recently.

You might be a bit late to the game here, but it would be worth reaching out to both these firms if you want to work in San Francisco and you have experience in tech, healthcare, or financial services.

You can skip headhunters because they are unlikely to be helpful at your level.

They want candidates who line up exactly with what firms are looking for, which means an Analyst from Barclays’ Energy Group who grew up in the UK, lived in the Middle East, and plays golf with under an 85 handicap.

Step 5: Reach Out to These Firms the Right Way

At this level, you should know how to use LinkedIn and email to contact people. If not, see our tutorials and templates.

You could use LinkedIn to look up a firm that’s currently fundraising, find professionals there, and then email them (or use LinkedIn if you can’t find their address) with something like:

SUBJECT: [Firm Name] – New Fundraising Inquiry

“Hi [Name],

I saw in the news recently that your firm, [Firm Name], is currently raising $XX in a new fund. I’m an Associate in the [Group Name] group at [Bank Name], and I’m very interested in private equity investment in this space.

I just wanted to know if you had 5 minutes to speak so I could introduce myself and learn more about your new fund.

Thanks,

[Your Name]

Besides the usual email and LinkedIn tactics, a few other networking strategies are more plausible at this level:

  • Conferences: You may not go to a ton of conferences as a younger Associate, but you will get pulled into them more and more as you move up. You could use these to meet people at normal companies in your industry, or to meet with buy-side firms who are attending the same conferences.
  • Client Visits + Recruiting Trips: You often get pulled into due diligence meetings and “deal negotiation” meetings, especially when a deal is just starting or when it’s about to finish up. You could use any downtime to conduct in-person meetings with firms in the area; you probably won’t have time for more than coffee, but even that is more effective than 100% online outreach.

Step 6: Push for the Interview

There isn’t much to this: follow up… follow up… follow up… and then send a few more follow-up messages for good measure.

More importantly, you should prepare to answer objections, both voiced and unvoiced, about why you’re making this move.

So you need to figure out what you can offer beyond traditional IB Analyst candidates:

  • Operational Expertise: Particularly if you’re aiming for growth equity or operationally focused PE funds, and particularly if it’s a “down market” with less deal-making, operational experience from your pre-MBA life can be huge.
  • Industry Connections: These can be invaluable for sourcing new deals or even helping portfolio companies to find new suppliers, customers, etc. Again, your pre-MBA experience will determine this one.
  • Project Management/”Execution” Experience: As an Associate/VP/Principal, you’ll be tasked with driving transactions to completion… and you do something similar in banking (though more at the VP level). Some firms might be willing to overlook less modeling experience if you are great at herding the cattle across the finish line.

Much of this comes down to the specific firm’s strategy: a distressed credit fund will have one set of concerns (“Do you have the technical chops to work here, even though you’re not an Analyst?”), but a corporate finance team at a Fortune 500 company will have a different set (“Can you fit in with our culture, even though we’re not all serial killers?”).

Step 7: Prepare for Associate/VP-Level Interviews

Interviews with private equity firms and hedge funds will focus heavily on your deal experience and investment ideas at this level, so you need to solid talking points for all of those.

We’ve covered stock pitches and private equity investment recommendations quite a bit, so you should review those articles and come up with 2-3 ideas if you’re going for roles that require them.

These don’t need to be 20-page documents, but you should be able to explain your thesis, the catalysts, the valuation, the risk factors, and how to mitigate risk.

For your deal experience, you should be prepared to explain the following points for each transaction:

  • Rationale: Why was the deal happening?
  • Buyer/Seller Background Information: What were their financial and market profiles?
  • Your Contributions: What did you do to drive the deal forward, or to prevent it from happening (e.g., in a buy-side M&A deal)?
  • Your Opinion as an Investor: If you were the buyer or the investor(s) in the deal, would you have done it? Why or why not? What would make you change your mind?

Interviews at normal companies will be more open-ended and highly dependent on the company in question, but you’ll still get similar questions for corporate development-type roles.

Your story is always important, and for these types of transitions it has to answer one specific question:

“If you’re so interested in being an investor in this sector, why didn’t you start earlier or join at the pre-MBA level?”

You could answer that question in a few ways:

  • Prerequisites: You had been interested in becoming an investor after your pre-MBA experience in the industry, but you needed investment banking experience first to have a good shot.
  • Late Bloomer: After your pre-MBA experience, you wanted to work in finance but you weren’t sure if it would be as an investor or adviser. After working on a number of deals, now, you’re confident you want to be an investor instead.
  • Specific Deal: You could use the same story, but point to a particular deal that made you more interested in buy-side roles (i.e., if you were frustrated by the limitations of IB, such as not getting to work with companies over the long-term).

It’s extremely unlikely that you’ll move into a new role at the same level you’re at in banking.

Expect some type of “discount,” whether that means coming in as a Senior Associate rather than a VP, or coming in as a 1st or 2nd year Associate rather than a 3rd or 4th year one.

Step 8: Develop a “Plan B” In Case This Doesn’t Work Out

The easiest exit opportunity as an Associate is to join another bank or another group at the same bank.

You’re not switching industries if you do that, but if you want to leave because your group sucks or because your superiors are crazy, you might get some relief.

Beyond that, the corporate route tends to be the most common exit for IB Associates.

So if buy-side roles don’t quite work out after 6-12 months of effort, you could switch your focus to finance-related roles at companies in your industry instead.

Putting It All Together: How to Win Exit Opportunities as an IB Associate

So here’s an example of how you might put together all these steps to win a buy-side offer as a post-MBA Associate:

  • Pre-MBA Background: You worked at Pfizer in a junior R&D role, and then switched to healthcare consulting at a Big 4 firm.
  • MBA and Banking: You attended a top 10 school, did an internship at a bulge bracket, and joined their healthcare team. You did well and got a return offer.

The role started off well, but you realized that a lot of the work is extremely high-level, and you’re looking to do more hands-on operational work and work with companies over the long-term.

At the end of your first year, though, you don’t have enough solid deal experience to push for a move into private equity, so you wait until the end of your second year to start recruiting.

  • End of Your Second Year (24 Months In): You begin reviewing your deal experience and models, and also preparing ideas for interesting sectors/companies to invest in.
  • Networking: Around the same time, you begin reaching out to healthcare-focused PE funds and VC firms in your area. After a few months, you don’t get a great response from VCs because they want PhD’s, so you switch your focus to PE.
  • Narrowing the Firms: You receive a news alert about one firm that just raised $1 billion. Even though it’s bigger than others on your list, you might get a better response rate from them because of this expansion. Also, this firm focuses on operational improvements, so it aligns with your background.
  • Interviews: This firm proves responsive, so you come in with one public investment idea and two private ideas. You also have solid talking points on two M&A deals and one convertible deal you worked on.
  • After the Interviews: After that, it could turn into an extended process… or you could get an answer very quickly. We’ll be generous here and assume the process takes 3 months from beginning to end, so you move into PE near the end of your third year.

It probably won’t happen exactly like that, but you might use a similar strategy to make this transition.

Exiting investment banking at the Associate level isn’t the easiest thing in the world, but it is possible with enough persistence.

So the next time someone says it’s “impossible,” be skeptical.

It might just be nothing.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Do you think is possible self study and to breaking into investment bank as financial analyst from another an unknown/ slow-big firm/company and than making lateral moves to PE or more reputable Investment Banks without considering a more advanced degree?

    Thanks Brian!

    1. Breaking in initially to lower/middle market IB or PE than moving the moves without degrees by self-studying?

      Sorry for the add on.

    2. It depends on how much work experience you have. If it’s 1-2 years, sure, maybe, but if you’ve been at this big company for 3+ years, no, probably not. I have seen people move from companies like GE into IB at smaller firms before. But if you wait too long, you’ll need an MBA to make the move.

  2. Brian,

    I am currently in an “investor” role at a well known REIT. I have 3.5 years of CRE experience and I am actively being recruited for opportunities at decent sized REPE firms in my geography (think NYC,LA etc).

    Does it make sense for me to get an MBA and go to a different industry coverage group (Consumer Retail) to transition to a more traditional LBO fund after a few years instead of REPE? Would my Pre-MBA exp. pigeonhole what IB group I can get into (Automatically REGLL?)

    How hard would this transition be? Much of the leverage/competitive advantage you seem to be stating in this article is using your pre-MBA experience. I would not have the advantage of this on a switch like this.

    I don’t dislike CRE but I wanted to see if going to an LBO fund would be possible. If I stayed my course I could avoid a full time MBA and a low probability transition. I assume this would be the most lucrative for me from a cash flow and net worth building perspective. Especially, if I would end up at lower MM PE firm post MBA with no guarantee.

    Interested to hear your thoughts on this.

    Thanks.

    1. No, I don’t think that makes sense unless you really hate real estate and never want to work in the industry again. An MBA is hugely expensive and not worth it in your case since you’re already recruiting for PE roles. It’s better to work in REPE for a year and transition to a generalist fund if you want to do that. It is possible: https://www.mergersandinquisitions.com/real-estate-private-equity-london/

  3. Hi,

    Should I do an MMS or MSF to get in as an IB analyst or wait and work 3 years to get a top 15 MBA then IB asssociate -> PE/VC?

    1. It’s impossible to answer that question without knowing your background and previous work experience. In general, it is better to get in earlier if you can plausibly do so. If you cannot, i.e. you are doing something completely unrelated to finance right now and have been doing it for several years, then you may have to use an MBA to get in.

      1. I am a liberal arts grad from May 2017 currently working as a Financial Advisor for a Fortune 100. Should I do an MMS, MSF, or MBA?

          1. What about top MMS programs like Duke, Michigan, Virginia, Northwestern, and Notre Dame. Should I consider an MSF over these programs?

          2. I don’t think there’s a big difference, but the MSF tends to be more useful for investment banking specifically. You should attend the school with the best reputation and access to recruiters.

          3. Hi Brian,

            Also, wanted to find out why an MSF over an MBA? Is it just to get in earlier?

          4. An MBA requires several years of full-time work experience (if you want to use it to get into IB roles) and is more expensive and time-consuming, so you should avoid it unless you really need it.

          5. I want to use the MBA to get into IB. I was thinking about working three years then doing an MBA. Do you think the three years will be enough?

  4. Brian,

    What a great article.

    Would you agree that a more important milestone after which a post-MBA Associate can start looking for an exit is not time (2 years as Associate as you suggest) but number of deals done?

    How many deals done do you think would be sufficient enough for opening doors / have substance to talk about in interviews? 2, 3, 4, more?

    Thanks!

    1. No, not really, because in practice, you just need ~2 good deals to speak to in interviews, and if you don’t get 2 decent deals within 2 years, then you’re in the wrong group/bank.

      It’s still better to move over as soon as you can do so because other firms will assume that you want to be a lifelong banker the longer you stay there. So on balance, it is better to move over earlier, even if it means you have less deal experience (just think about PE recruiting these days and how Analysts often win offers with 0 closed deals and 0 live deals – just pitches).

      1. Jimmy Ng

        Thanks, Brian! Understood.

  5. Another question: as a post-mba associate, I want to get into mega funds such as KKR and Blackstone. I understand it is very hard to do so at MBA level and from middle market bank. If I really want to give a try, shall I move to a BB/boutique first and try to find opportunities there, or shall I get into a middle market PE first and lateral to a mega fund? Thanks!

    1. You should probably just move into PE first and then aim to go to a bigger fund from there.

  6. I am a first-year post MBA associate at a middle market bank. If I move to a middle market PE fund after one year, what title will I get there? Will I be an associate (I think that is for analyst hire) or senior associate? Do people get paid more at PE than in banking?

    Looking at the comp numbers, don’t think there will be many places that pay better than banking so that is why people (senior associates and above) rarely leave banking.

    1. Again, please refer to my comments on the article about pretending to be different people / using different email addresses: If you have so many questions, gather them in one email and send them over.

      You will just be an Associate if you move over after one year. Many of your questions, including the ones on compensation, have already been answered in previous articles, including ones where you left comments under different names/email addresses.

  7. Great article. If I go corporate route (corporate finance/development) after 2 years of IB associates post-MBA, how big of a salary cut do I take? 50%?

    1. sorry I missed your reply below, thanks for the response!

  8. If I go corporate route (corporate finance/development) after 2 years of IB associate post-MBA (not promoted to VP), how big of a salary cut do I take? 50%?

    1. Yes, probably. Base salaries tend to be close to IB base salaries (though maybe a bit lower vs. Associate pay), but the bonus is a lot lower. To reach the $500K+ total compensation level, you’d need to be a VP at the company, which is much harder to do in normal industries (since the VP title means a lot more).

      1. what’s an average range of year end bonus at IB associate level post MBA?

          1. Thanks for the link, this is really helpful!

    2. So if corporate route is very common, why would so many people get an MBA to get in i-banking, and only to find out their salary will probably go back to their pre-MBA salary level after 2 years of graduating? I don’t get it…

      1. I’m just talking from a pure $ perspective.

      2. Because no one knows what they want to do in life. People assume that they can handle banking but then realize they hate it 3 months into the job and would rather just earn less money and have more of a life. Also, people make decisions based on emotion, not logic. Logic is completely irrelevant.

        1. Good point, thanks!

  9. Very helpful article. I am an MBA associate doing IB for 2 years now at a bulge bracket bank in London. I am considering exit options and the above provides me with a good perspective of thing to consider. thanks.

    1. Thanks! Good luck with your recruiting efforts.

  10. Great article Brian! I have an irrelevant question here – I have been doing corporate lending for 3 years – can I still apply through the upcoming campus recruiting program as a 1st year analyst or are those only reserved for university grads only?

    1. M&I - Nicole

      Yes I think such roles are usually reserved for university graduates.

  11. False Number 9

    Brian,

    Thanks for another great article.

    I have an investment banking Associate offer from a Top 10 non BB (just completed my MBA summer internship in the Consumer & Retail coverage group). I am looking to transition to PE after 1-2 years of IB experience. Would it help me to move to the M&A Group instead of the Consumer coverage group to move to PE. Although I will be working on sponsor acquisition financing deals in the coverage group, I will get more live deal exposure in the M&A Group. Any other suggestions on choosing a group once I join full time?

    Thanks,

    1. I don’t think M&A would make a huge difference over Consumer coverage as long as the deal flow in the Consumer coverage group is solid. For PE you need a variety of skills (industry knowledge, deal experience, an understanding of debt), so any group with good deal exposure is a good bet.

      You could argue that Leveraged Finance or M&A might be marginally better if you don’t want to focus on a specific industry but you still want to go into PE, but it would be very tough to do that anyway at the Associate level. So I think it’s actually better to stay in a strong industry group and then go for PE firms focused on that industry at your level.

  12. I currently work in IT but got an offer in the same company to shadow someone in the Finance Department, but I need my manager’s approval. How can I explain to my manager that this training would help me in my current role in IT?

    1. Say that by understanding the Finance Department in more detail, you can do your job more effectively in IT by learning Functions X, Y, and Z. Doing so will also make your Manager look better and help him get promoted more quickly.

  13. As a post-MBA IB Associate that’s been going through this process over the past year, I’d confirm a lot of what’s been said here and just want to thank you for putting this down on paper. It will be helpful to a lot of people and you’ve listed a lot of things I wish I had known earlier.

    1. Thanks, glad to hear it! Let us know if you want to do an interview on your experiences at some point.

  14. Thanks Brian.
    What are the pros & cons of quiting an Associate position and only then starting recruiting? Does it materially affect the hiring probabilities?

    1. It may hurt your chances, yes, since you always have a better chance of getting hired when you already have a job. So it probably only makes sense if your job is so demanding that you have almost no free time to recruit. Otherwise, if you can get even a few few hours per week for recruiting it’s probably best to stay in your current role. There may be an exception if you’re going for something dramatically different, e.g. quitting to join a tech startup, and in that case it might make more sense to quit since they won’t care as much about your current employment status and quitting would give you a lot more time to properly vet companies.

  15. What about exit opportunities as an non-MBA IB associate (i.e. a IB analyst who has been promoted to associate)? I have heard a lot of PE firms aren’t interested in these kind of candidates, but it doesn’t make complete sense to me why not. Thanks!

    1. Yeah I think the problem there is that it would be tough to explain your rationale for why you didn’t move over much earlier on but instead waited for the promotion… So if you have a really good way to answer that, sure, but I imagine it would still be a bit tougher. On the other hand, you can more easily prove you have solid technical skills so that would help your case.

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