One of Bain's biggest differentiators in the management consulting industry is their Private Equity Group, or PEG, as it's referred to within the firm.
Bain's Private Equity Practice is much larger than either McKinsey's or BCG's, both in terms of the size of the team (over 1,000 people) and the number of deals they're involved in. As they report, "Bain has advised on half of all buyout transactions worldwide valued at more than $500 million in the past decade."
You may be wondering exactly why this expertise matters or how it could impact your decision to work at Bain. Or maybe you're thinking, "what would a private equity case look like?" Don't worry, we'll cover all this and more below.
In this post, we'll cover the following:
Let's get started!
If you have a good understanding of what's meant by private equity, skip to the next section. For everyone else, let's dive in.
Private equity (PE) is an umbrella term used to describe funds (comprised of pooled investor money) that invest in or directly buy companies that are either already outside of public markets or with the aim of taking them private (e.g. they will no longer be listed on the public market they used to trade on, like NASDAQ, etc.).
How do PE firms make money? They essentially flip businesses, much like someone could flip houses. PE firms use large amounts of leverage (lots of debt) to buy a company, then use their industry or operational expertise to fix their purchase up - improve efficiency, expand to new markets, etc. Their goal is to sell the business in just a few years - to a different PE fund, a corporate buyer, or the public markets (IPO) - for a large return.
So where would a management consulting firm come in to this equation? Let's take a look.
Bain's Private Equity practice can support Private Equity clients throughout the lifecycle of their investments. Clients might engage Bain when they are looking to:
Let's go through a hypothetical due diligence example, since this is the most unique work for the PEG group (optimizing a portfolio company is similar to just optimizing a typical client company).
Let's say there's a PE Firm called Rocket Capital that typically buys small restaurant chains, launches them in new markets, then sells them to more established businesses.
The majority of their investments are fast casual or casual chains that are regional players. The firm has recently been seeing huge growth in the frozen yogurt market and are interested in buying a small chain that's become the market leader in the midwest – Green Mango.
However, Rocket Capital doesn't have as much knowledge of this space, and wants to move quickly as they think other firms may be eyeing Green Mango as well. In this situation, they might bring a Bain team on for a couple weeks to support due diligence activities. This could include broad market research (customer and expert interviews, surveys, third party reports) to estimate potential growth of the frozen yogurt industry over the next 10 years.
In addition, Bain might look at the competitive landscape and what Green Mango's advantages or differentiating factors are. Finally, Bain could provide insight into areas of opportunity for Green Mango if the deal went through, including identifying geographies that are attractive for expansion, operational improvements (e.g. changing suppliers or renegotiating contracts), or potential exit options.
It's important to call out some of the major implications of working in PEG and being involved in this type of work.
In terms of lifestyle, PEG cases feel more like short sprints of work: 2 or 3 week cases with clear deliverables and tight timelines. This means consultants often have very intense weeks followed by a couple days off between deals.
Second, PE clients tend to be very demanding. Part of this is due to the people PE attracts (ambitious, direct, logical), and part is due to the high-stakes nature of these deals: firms are considering investing millions or even billions, so the pressure they feel can often spill into PEG due diligence teams.
On a positive note, the short timelines mean there's opportunity for consultants to go through numerous deal cycles - which can mean accelerated learning and great industry experience. Also, PEG teams rarely travel, as they aren't working out of a client's site and can do much of their work from the office. This can be a huge plus for those that want to stay local.
In terms of staffing, the private equity practice is a bit different than a standard case. Consultants are staffed to PEG for 6 months at a time, so it's almost treated like a rotation within the firm. PEG includes consultants at all tenures; ACs and Consultants will typically share their interest in being staffed to the group when they meet with the staffing manager.
As someone applying to Bain, you wouldn't apply directly to PEG, but it is useful to note that some Bain offices have bigger practices than others. For example, Boston, London, and Chicago have some of the largest private equity groups, so if PEG is on your radar, applying for an office with a bigger private equity presence definitely makes sense.
Nearly one quarter of Bain's global business is now private equity work, but this wasn't always the case. In fact, the history of private equity at Bain goes back to the early years of the firm when Bain Capital was started.
It's impossible to talk about Bain's Private Equity Practice without briefly touching on Bain Capital. Although there is often confusion between the two firms, they have always been separate entities: Bain & Co. is a management consultancy, whereas Bain Capital is a private equity firm.
Mitt Romney, a former Bainee, started Bain Capital in 1984 (full list of famous ex-Bain employees here). The idea was to apply the same principles Bain used with their clients to businesses they invested in. Although the two businesses are independent, they have always and continue to work together. For example, Bain Capital supplies Bain with a steady stream of PE work, and Bain partners are eligible to invest in Bain Capital funds (which is a big selling point).
Ultimately, Bain's work for Bain Capital gave them a beachhead to build up a private equity practice - it was the springboard that launched the practice. While they continue to work with Bain Capital, the Bain PEG does work for hundreds of different private equity firms across the globe as well.
What would the benefits be of working in PEG longer term?
Working in Bain's Private Equity Practice can be a great opportunity to learn more about the private equity industry. A rotation in PEG will also provide really solid hands-on experience and exposure to the deal flow. This would be hugely beneficial for someone looking to work at a private equity firm after consulting. Aside from going into investment banking, doing a PEG rotation is one of the best ways to get your foot in the door of the PE industry. Given the close relationship, Bain Capital is a popular firm for Bainees looking to make the transition to PE.
Overall, Bain is a great place to work for those interested in private equity or looking to keep their options open after consulting. Bain's experience in the industry and constant deal flow makes the practice one of the biggest strengths of the firm.
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