May

The top 5 reasons P.E. firms hire management consultants

by Caroline Wilson
Vice President at Charles Aris Inc.

As an executive recruiter who has spent nearly eight years recruiting top management consulting talent for our clients, many of which are private equity firms, I sometimes am asked the question, “Why should a private equity firm hire management consultants?”

I often hear this from someone at a firm that has historically hired investment bankers instead.

Here are my top five reasons to hire a management consultant:

  1. Problem-solving skills: The best management consulting candidates excel in solving difficult and often ambiguous problems for their clients. Many of our private equity clients have noted that it can often be easier to teach a management consultant how to model like a banker than it is to teach a banker to think like a consultant.

  2. Strong analytics: Top management consulting candidates are highly analytical, with lots of exposure to Microsoft Excel and all that it entails. Though most will not have had much (if any) valuation modeling experience, my clients report that top candidates will build that skill set quickly, given training and mentoring (see reason No. 1).

  3. More experienced candidates: The majority of pre-MBA Associate-level hires are extended offers 18 months in advance. Since most banking programs last two years, that means candidates with experience of six months or less are being interviewed for these jobs. In the consulting world, it’s more common for candidates to stay for three years; as a result, most consulting candidates that I see accepting offers in private equity are in their second year of experience. The upshot for hiring authorities? Instead of interviewing candidates who at most have six months of work experience, you can gauge management consulting candidates in their second year on the job. Those consulting candidates have more work experience, a track record of performance at their current firm, and tend to perform better in interviews. This makes it easier to avoid hiring mistakes based purely on potential rather than performance plus potential.

  4. Wider candidate pool: Considering candidates from a wider range of backgrounds enables firms to access a more diverse candidate pool. Hiring top investment bankers has become more difficult in recent years – in great part because of the high level of competition between private equity firms for this talent, but also because fewer bankers are choosing private equity for their next step. Many candidates with entrepreneurial aspirations are heading to start-ups or Silicon Valley; for better or worse, they frequently are the precise candidates whom private equity firms aspire to hire.

  5. Focus on value creation: As private equity firms increasingly focus on value creation to drive returns for investors, many are finding the management consulting skill set a fantastic match. In addition to portfolio operations roles which tend to focus exclusively on driving value within portfolio companies, more and more firms are hiring consultants for hybrid roles requiring a mix of deal and portfolio work.
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