Private Equity vs Consulting: Eat your own Cooking

The opportunity to join a private equity operations team appeals to consultants for many reasons. Two major reasons include the chance to execute strategies through ownership of portfolio companies, and the opportunity to create wealth. And while it’s true that private equity can be a lucrative field, it’s important to remember that a payout is not guaranteed just by being there: the upside is tied to your ability to own and manage your portfolio companies, which is both the reward and risk of the industry.

 Here we’ve gathered a few insights from former consultants, now private equity executives, on some of the critical differences between consulting and private equity:

 The Deliverable

“The main difference is that, in consulting, you refer to companies as ‘clients.’ In PE, we refer to them as ‘our companies.’ It makes a difference in what you do and how you do it. While many management consulting firms will deny it, at the end of the day their product is a recommendation that comes in the form of a PowerPoint presentation. And I’ve done that before. In what I do now, I barely ever use PowerPoint presentations. I’ll get a 6-month project for a company and I have a revenue target – that’s my product.”

Jeff Kimbell, Operating Partner, Cerberus Capital Management | Bain alum

 The Time Frame

“In some cases with consulting, you’re on a 4-6 month engagement where you have to focus on immediate execution, and then transition out of the assignment. The duration of the project is much different in private equity, where you’re involved in the ownership group of the company and can put in the time and effort to do a much longer-term project… Though they take more work up front, those longer-term activities might have a bigger reward at the end of the day. Sometimes that’s not an ideal model for consulting because not many clients would have the patience to wait 18 months to see results.”

Adam Fless, Director, KKR | AT Kearney & AlixPartners alum

Accountability

“We are all shareholders in these companies via KKR, which means we all have an incentive to make these companies successful financially. There is an “eat your own cooking” element to the job that I very much like, because it demands intellectual honesty in the work you do… If we actually deliver value, we benefit because we are shareholders, which makes it directly satisfactory.”

Adam Fless, Director, KKR | A.T. Kearney & AlixPartners Alum

The Payout

“Money can come from a lot of places. In private equity, if you love the idea of being an owner, the money will come, but if you can’t wake up every morning and feel like it’s your money on the line, then it won’t. I’ve seen a lot of people go into private equity who don’t make any money. You have to start with the right DNA and set of skills to make it successful.”

Maggie, Portfolio Company Business Unit President | AlixPartners alum