Junior M&A bankers who quit for private equity want their old jobs back

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Is private equity better than banking

If you're a junior in an investment banking division (IBD), you probably want to quit your banking job and work in private equity. This applies equally to bankers on Wall Street and in London as it does to bankers in Frankfurt and Paris. Beware, however: in Germany, banking headhunters say that an increasing number of analysts and associates who leave for the greener grass of private equity are finding that the buy-side isn't what they were expecting.

"I get more and more calls from young private equity professionals who want to return to investment banking after six to twelve months," says headhunter Jan Graffelder of Look & Graffelder in Frankfurt. "Some people don't feel right in private equity." In the past six months alone, Graffelder said he's received half a dozen of these calls, all from people who had previously worked for major American or European investment banks.

The big issue in private equity seems to be the working hours. Although our recent survey on sleep in the financial services industry suggested private equity professionals are well-rested compared to junior bankers, Graffelder says plenty of bankers who go into PE have a terrible shock there. "Some find the workload in private equity is similarly high," he says. Similarly, the work in PE can be as tedious as in banking. Headhunters say there's a growing tendency for private equity juniors to work on nothing but the kinds of financial models that used to be the domain of junior bankers.

This isn't all, though. Graffelder says banking juniors who move into private equity can end up a bit, well, lonely. Teams in private equity are often a lot smaller than in banking. In the worse-case scenario, there have the same working hours and none of the camaraderie. It doesn't help that private equity salaries are often lower than in investment banking - in PE you're really working for carried interest which may, or may not, come through.

Graffelder isn't alone in detecting a reversal in the tide of junior bankers flowing into private equity. Sabrina Tamm at headhunters Financial Talents in Frankfurt, says the experience can be a disappointment. "At larger private equity companies, there's just as much a 'machine room' as at investment banks," she says. "Young employees simply calculate one model after another."

With private equity companies globally sitting on $1.8 trillion of dry powder according to McKinsey & Co, and struggling to deploy it effectively while target companies are so expensive, there's also the danger that juniors at funds simply do lots of modelling and no deals. Graffelder says this is another problem, and one few junior bankers anticipate.

But can you move back to banking when you've quit for PE? Apparently so. Tamm says she's helped some juniors back into their former banks once they've figured private equity isn't for them.

"You should never break the bridges to your old employer," she observes. Some banks even like to re-recruit juniors who left for private equity as a way of dissuading others from leaving. "The remaining employees think they did everything right. It serves as a warning to anyone who might jump, thinking the grass is greener on the other side," says Tamm.

"If you've been in private equity, your chances in the job market are very good," says Graffelder. He says there's a lack of junior staff in M&A. "If you don't go back to your old employer, a competitor will usually hire you."

Have a confidential story, tip, or comment you’d like to share? Contact: sbutcher@efinancialcareers.com

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