Consulting exit opportunities: 28% of management consultants pursue finance

I’ve briefly discussed consulting exit options before.

This article is part 1 of 2 that will “deep dive” into the topic (with a precise estimate of the percentage pursuing each).

I considered bumming on a beach in Koh Samui when I left consulting, but for more ambitious folk, here are the main paths:

Private equity

Percentage: 12%

Mergers and Inquisitions briefly covers this topic in its private equity recruiting post. Consultants are well-suited for private equity jobs – but they need to pick their spots.

  • Most consultants exit to middle-market PE firms that are operationally-focused on portfolio companies and leverage consulting skillsets well
  • Most consultants exit to PE firms with a tradition of hiring consultants. Golden Gate Capital is one example. Others include Audax and Capstone (the “consulting arm” of KKR)
  • Larger shops like Carlyle and TPG prefer consultants with corporate finance project work or prior banking experience (eg, a summer internship at Morgan Stanley)

What are the benefits of leaving consulting for private equity? PE offers better pay, great prestige, and an opportunity to work on industry-shaping deals.

If you want to work in PE and have the opportunity, take it now. It’s easier to enter the industry before business school than after

What are the best consulting firms to enter private equity? Target the big guys (McKBain Group) and those with a financial sector focus (eg, Oliver Wyman).

Hedge funds

Percentage: 7%

Like private equity recruiting, consultants can break into the hedge fund industry but opportunities are limited. Focus on funds where consulting skillsets are valued. For example, equity long-short and macroeconomic funds emphasize market research and operational due diligence in investments. Specialized funds (such as mezzanine debt) would not be a good fit.

What are the benefits of leaving consulting for a hedge fund? Like private equity, hedge funds offer better pay and industry-changing opportunities. This is another industry where entering before business school is easier than after.

Asset management and equity research

Percentage: 9%

Business consulting skillsets are a great fit for jobs in asset management and equity research. Work for the best consulting firms and target modeling-heavy projects.

With all consulting exit options into finance, your path is made easier by taking a finance job to begin with. Investment banking with prestigious M&A groups offers a better shot at strong private equity and hedge fund exits

Entrepreneurship

Percentage: 16%

Consulting provides a strong platform for entrepreneurs – you’re exposed to multiple industries, complex business problems, and a wide network of business-savvy people. I took this path upon leaving McKinsey.

There are 2 options:

  • Start a company – this is common across tenures. In fact, Bain was started by a former BCG partner! A colleague of mine is CEO of GiveReal, if anyone wants to send me a drink
  • Join a startup – consulting firms are full of entrepreneurial people, and usually have strong startup communities helpful for recruiting

That’s it for now. Expect the concluding part 2 on Consulting Exit Opportunities tomorrow (topics include graduate school, Fortune 500, and more).

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  • Consultant99

    On your point on entrepreneurial activities, the consulting network can become extremely valuable when starting a company. Aside from the obvious–very deep rolexes of top angels/VCs/Corporates only one degree separated from you–there are other benefits. I know of some consultants who have raised funds from the partners and had partners sit as advisors on their new companies’ boards. You also have a network of very smart colleagues who can help build business plans, critique ideas, etc.

  • kgao

    Consultant99,

    Your point about the consulting network’s value in entrepreneurship is a great one, and something I’ve personally experienced.

    Your comment was caught in my Akismet spam filters which explains the delay.

    Cheers!

  • Tejas Deshmukh

    Hello Kevin,

    I would say being an entrepreneur (like you have done ) is the best exit option.

    In fact, I would say in such down turn, with a little bit of smartness and luck , one can start a small business(may be a franchise.) and then graduate to a full blown business.

    Again these are my thoughts , may not be 100% correct.

    Regards,
    Tejas

  • Mike

    Kevin, I was wondering if you had any information on what the difference in pay will be for someone moving to PE or a hedge fund from consulting.
    More specifically, how much do ex-consultants make in their first year at a HF or PE firm?

  • Kevin

    Mike, it depends on several factors:

    -Whether you’re talking pre- or post-MBA
    -Which HF or PE firm
    -What part of the cycle we’re in (for instance, right now is not the best time in those spaces)

    On average, you can expect at least 2-3x above comparable strategy consulting pay.

  • Sue

    Kevin, this website of yours is an amazing goldmine which tells it like it is for all the banking/ consulting/ investment careers. Fantastic job!

    I’ve ~2+ years management consulting experience with a top tier firm, and was contacted recently by a headhunter about a potential opportunity with a PE House which focuses on investing in an industry which I’m really passionate about. They are looking to invest in a new geography which I’m very familiar with, having grown up and worked there extensively.

    What I would really like to know is, at my level, what exactly will the job scope entail? Will the focus be on hardcore modelling and cold-calling to source deals?

    Thanks much!

  • Kevin

    Sue, thanks for your nice comment. I am not the expert on PE, but happy to put you in touch with someone who can speak much better to that experience. Email me (products@) and I’ll put you in touch. Thanks

  • Steve

    Yo Kevin-

    As promised, here’s the Q. Few would disagree that an entrepreneuer with a successful venture are great shoes to be in. Your style seems to be wary of the value of an MBA (with good reason, b/c of the price tag). While one can always open up shop without a degree, studying for an MBA can get you connected to the people with the ‘right stuff’ to make new businesses, namely researchers with great ideas. I wonder whether a former consultant has access to the same type of entrepreneuerial activities. Could you compare the types of ventures that are applicable to a former management consultant versus an MBA student?
    I appreciate your thoughts!

  • FF

    I am a junior major in financial mathematics and economics. My original plan is to get an internship in investment banking this summer and then apply for full time investment banking next year. But luckily I get a full time offer from Mckinsey this year and am thinking about graduating one year earlier for this job. I find consulting interesting. But eventually I want to go to investment banking later in my career. What do you say? Should I take this job offer or should I wait another year and find an investment banking internship this year?
    Thanks

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  • QfMC2011

    If you want to move to trading, how do you make the transition? When is the best time?
    Thanks, Kevin!

  • QfMC2011

    How do you find hedge fund openings?
    Thanks, Kevin!

  • Mohit Baid

    Except Oliver Wyman, which other management consulting firm has a financial sector focus?

  • Gaurav

    Great post…

    Do anything. Dont go for banking after consulting.. A chill runs through my spine after having a mere thought….

     

  • jennyrae

    The first that come to mind are IBM GBS as well as Oliver Wyman, but are you talking about firms in finance or firms consulting to the financial services industry?

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