Secondaries PE Recruiting
For secondaries PE recruiting, I am wondering how important the following are :
1) Being in a secondaries coverage group or sponsors coverage group. These seem like the most directly related groups for a secondary role, so I am wondering how much being in other groups would hurt.
2) Bank level. Does being at a BB/EB give you a significant advantage over respectable MM firms like in standard PE recruiting?
I am also wondering how I should prepare for secondaries and what the timelines look like. It would also be helpful to get an updated sense of the top firms in the market to target, I am aware of the larger players like Blackstone, GS, Coller, or Lexington but would appreciate more insight into the general big players of the space and what the top names are to target.
Based on the WSO Dataset, here's what you need to know about secondaries PE recruiting:
1) Coverage Group Relevance: Being in a secondaries coverage group or sponsors coverage group can indeed provide a significant advantage when transitioning to a secondaries PE role. These groups often deal directly with the types of transactions and analyses that are relevant in the secondaries market, providing you with pertinent experience. While being in other groups might not necessarily hurt your chances, it may require you to make a stronger case for how your experience is relevant and transferable to secondaries PE roles.
2) Bank Level Importance: In the context of secondaries PE recruiting, being at a Bulge Bracket (BB) or Elite Boutique (EB) can provide a notable advantage, similar to standard PE recruiting. These firms generally have a broader reach, more significant deals, and stronger brand recognition, which can be beneficial during the recruiting process. However, respectable Middle Market (MM) firms can also provide valuable experience, especially if they have a strong track record or specific focus in the PE or secondaries space.
Preparation and Timelines: Preparation for secondaries PE roles should include a solid understanding of financial modeling, particularly LBO models, as they are crucial in evaluating potential secondary transactions. Networking with professionals in the industry and participating in relevant discussions on platforms like WSO can also be beneficial. The recruitment timeline can vary, but it often aligns with the on-cycle process for PE recruiting, which typically starts early in your tenure at an investment bank.
Top Firms in the Market: Besides the well-known players like Blackstone Strategic Partners, GS AIMS, Coller Capital, and Lexington Partners, other significant firms in the secondaries market include Apollo S3, TPG Ares, Landmark Partners, Glendower Capital, ICG, BlackRock, Pantheon, AlpInvest, and Neuberger Berman. These firms are considered some of the big players in the space, and targeting them would be a strategic move.
Understanding these aspects can significantly enhance your preparation and approach to breaking into the secondaries PE market.
Sources: PE recruiting from coverage group at mid tier BB, Best Coverage Groups at Barclays & Group Networking, PE Secondaries Recruiting/HHs, Accept mid-tier BB Offer or continue recruiting?
Bump
Currently in secondaries advisory recruiting for buy-side roles so have pretty solid intel on what they are looking for.
Generally speaking, you’ll see previous experience fall in three buckets: M&A, secondaries advisory, and transactions/valuation advisory (i.e., people that can crank out models). If you end up in any of these spaces you’ll generally have a good shot but it’s key to understand where your skillset will be weaker compared to others so you know where you need to put in the extra work or compensate. For example, someone in M&A will have a stronger skillset in modeling and evaluating business models than someone in secondary advisory but the person in secondary advisory will have a massive leg up in understand the nuances of a secondary transaction. They are willing to train people up on either side of the coin but, for example, if you can prove that coming from secondary advisory you still know how to build LBOs, have a solid ability to think through business models and crush all the secondary questions you’ll be a strong candidate. Also, generally for smaller or newer firms, they may be targeting people who know what they are getting into so someone with secondaries experience is more attractive… it’s a niche space so sometimes they want someone who knows it and not someone who just couldn’t get into direct PE from M&A and may not enjoy the space.
Another warning, secondaries advisory does have a stigma that you are just processing NDAs, adding people to a VDR and passing off any financial analysis. This is can be true on the LP-led side of things. So, you’ll want to target groups where you know you’ll get GP-led experience that allows you to do more financial analysis and look at business models in more depth. This comment will probably get MS but I would honestly say Evercore’s LP-led team might be one of the worst for buy-side recruiting for that reason. If you only work on LP-led advisory you’ll be perceived as of having done very little deeper analysis of business models. Now, it is Evercore so they’ll probably look past that but even though the buy-side is purchasing large portfolios of companies, they are still underwriting the larger value drivers at a deeper level.
Overall, I think secondaries is more open to a variety of backgrounds - so BB/EB/MM matters less so and the quality of your experience and rationale for pursuing secondaries is more important.
Sorry, I wrote most of that through the lens that you weren’t full-time. Coming from M&A is still attractive. You’ll just need to hammer out why you’re interested in secondaries and really work on understanding the nuances of secondary transactions… how to improve alignment, evaluating GPs, waterfall math, transaction rationale, potential risks, pricing leverage, etc. What’s attractive to a passive secondary investor is a bit different than a control investor. A good way to frame it is, if you have no control over the outcome, what dynamics will reduce the variability in potential outcomes. And, once you factor those in, what is your actual return and is it attractive or do you need a discount and can you actually achieve that discount.
You’ll also get a lot of similar questions that you would receive in traditional PE related to thinking through business models / investment opportunities.
What about someone in a sponsors group at a mid-tier BB(BoFA/Citi/Barclays)? That's neither PCA nor M&A so would love to know how I would recruit out of a group like that.
Hm. Hard to say tbh as experience in sponsors coverage can vary widely. At face value I would think someone in sponsors coverage won’t be getting the modeling experience of M&A/valuation advisory or the secondaries experience of secondary advisory so I think it would be fairly challenging.
Secondaries doesn’t really have “on-cycle” and most hire at need so lateraling to M&A or secondaries advisory could certainly be an option before pursing buy-side roles.
How would recommend approaching this then? My group places fine into solid MM PE firms and according to some of the FT hires you can get UMM/MF with some people converting them once in a while. Would I still be competitive for the big secondaries funds given the BB background or should I look to move into an M&A or a PCA role?
If you’re in a group that’s converting to direct buy-out investing roles then your experience is likely good enough for secondaries.
Again, the BB experience I think doesn’t make much of a difference because it normally is an indication of the reps, size and variety of transaction types you work on… which is relevant for direct PE where you may look to run any one of those transactions types for a portfolio company of a specific size but not something you need to deal with in secondaries. In fact, I’d argue MM experience could be the best given how much volume (particularly on the GP-led side) occurs within MM companies and sponsors. That said, I’d say the majority of backgrounds I see are from BB/EBs just given the consistent quality of experience and talent that comes from these shops.
But again, I’d emphasize the fact that secondaries is fairly open to a variety of backgrounds as long as you are able to convey relevant transaction experience and how you can leverage that to hit the ground running in secondaries.
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