When financial behemoths go to war it’s talented young bankers that are the prize

The recruiting process on Wall Street has grown only more frenzied, despite a recent attempt to change it

Fri, Jul 11, 2014, 01:15

So one of the biggest players in private equity, Apollo Global Management, which had hired Amity, was quietly taking its own process to the next level, weeks earlier than its rivals had expected. (Representatives of Apollo and Amity declined to comment.)

Word spread quickly, sending other recruiters into strategy sessions that stretched into the wee hours. Recruiters are often paid fees equivalent to about a third of the first-year compensation of workers they place. One private-equity firm, Silver Lake, scrambled to set up interviews for that afternoon. Kohlberg Kravis Roberts scheduled interviews for that Saturday. Bain Capital, which had planned a preliminary event for Friday evening, received a number of cancellations from analysts already interviewing elsewhere.

The machine was in motion – a situation that made hardly anyone happy. “It’s this terrible prisoner’s dilemma,” said Daniel Sheyner, a former associate at Bain Capital. He was referring to a situation in game theory where players would be best served by coordinating their actions but, lacking information about what the others will do, are instead motivated to act according to their individual self-interest.

“It’s bad for the candidates because they have to make decisions really early,” Sheyner said. “It’s really bad for the banks. They just hired those people a few months ago. And it’s bad for private equity because they don’t have a track record to go on.”

Sheyner (31), who graduated in May from Harvard Business School, has turned this tricky situation into a business opportunity. He recently completed an exhaustive guide to the private-equity recruiting process, including sample interview questions and financial modelling tests. This e-book package, released in May by Wall Street Oasis, an online forum for finance workers, costs $299. Hundreds of copies have already been sold.

Wall Street has tried before to bring some order to private-equity recruiting. The six major private-equity firms, after years of interviewing candidates far in advance, decided two years ago to wait. The companies – Apollo, Bain, KKR, the Blackstone Group, TPG and the Carlyle Group – all chose to wait until January 2013 to recruit the workers who would start that summer, according to two people with direct knowledge of the situation, who would discuss private business matters only on condition of anonymity. But the detente soon fell apart. Smaller private-equity firms had done their recruiting on the earlier schedule. The giants grew concerned that they might be missing out on the most desirable candidates.

‘You fools’

“Everyone else said, ‘Ha-ha, you fools, we’re going to grab all the good talent before then,’” Zoia said. In April 2013, the six biggest companies returned to their early schedules, and the next cycle began, with junior bankers getting offers to start this summer. For aspiring Masters of the Universe, private equity seems more attractive than ever. The soaring stock market last year allowed firms to reap large profits by selling holdings, and top executives took home eye-popping sums. Leon D Black, the chief executive of Apollo, earned a total of $546.3 million.

On the back of its success, Apollo raised a fresh $18.4 billion fund to buy more companies. With ambitious plans, it needed more junior workers and those workers could be found at the banks.

The Wall Street career path once went like this: Spend two years in basic training at an investment bank after college, head to a private-equity firm for investing experience, go to graduate business school, and then back to Wall Street or on to another career.

But the power balance in the job market has shifted, as investment banks have had to reduce risky activities and sectors like technology promise jobs with generous benefits. One-fourth of the 2013 undergraduate class of the Wharton School of the University of Pennsylvania took jobs in investment banking, according to the school’s career services office. In 2007, before the crisis, almost half of that year’s class went that route.

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