GUEST COMMENT: How, and why, I decided to switch from investment banking to private equity

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Investment banking in the Middle East, much like in other areas of the world, is going through a tough time. Many international institutions have been scaling back in the region, while large local organisations have been making redundancies and re-evaluating their capital markets and investment banking operations.

The state of investment banking in the Middle East

I think investment banking will continue to suffer in the region. The firms that will perform relatively well are the regional banks with the big balance sheets. This means, generally speaking, that Saudi Arabia-based local investment banks attached to their parent corporate bank have regular deal flow on thee capital markets. The firms that will be OK are regional banks with big balance sheets (both on debt and equity).

Other banks outside of Saudi, I believe, will continue to suffer as the main economic activities that fuelled their growth in the boom years are no longer there to support them. You only have to witness the recent reorganisations at Shuaa Capital, EFG Hermes and Emirates NBD's investment bank to see evidence of this.

In these circumstances it makes sense for many investment bankers to consider what other options are available to them. In the region currently, there are really only two viable alternatives – wealth management in the ultra-high-net-worth arena (where your contacts come in handy) and private equity.

Adapting to the private equity industry

For the past four years, post-MBA, I've been working in investment banking (two of which were in Saudi Arabia), but my long-term career goal was always to move into private equity, and now I've achieved this. I was a consultant before business school, and investment banking was a similar career; essentially selling advice.

In private equity, however, you are accountable for your decisions on a longer term basis and you have a fantastic opportunity to shape companies, given the heavy involvement of managing the portfolio of companies you acquire.

This shift in approach also means adjusting your skill set. Moving into the new role means that I have to triple check my investment recommendations with the team, since we will be held accountable for the investment throughout its lifecycle. It means that my due diligence process is even more stringent than ever before and I am not just focused on "closing the transaction", which is the typical banker mentality. It is much more draining, but so much more rewarding.

I also believe private equity as a sector in the Middle East is picking up again. Many firms are sitting on dry powder acquired in the last two years, but deals are there and more recently there's been an uptick in activity either caused by distressed situations or growth capital requirement opportunities. The majority of the deals we see are proprietary, as we are very active in sourcing deals.

The challenge, though, is turning an opportunity into an attractive deal and that is the reason some take longer to close. However, I am still optimistic about private equity activity, especially if you are in the top tier firms (and there are only a few of them in the region).

How to make the switch yourself

Quite simply, you have to network! It's rare that a private equity role is advertised and you have to rely heavily on your network to fish out the role. Most recruiters will claim to have roles, but in my experience they exaggerate, or the job ends up being taken directly by a candidate who had stronger network in the PE sector. I can't emphasise this enough.

Also, it is important to realise the banking is not private equity. It is not enough to know how to put a LBO model together. You need to demonstrate a commitment to and understanding of fundamental business issues, ranging from strategy to operations.

So far, I have no regrets. It is great working with smart people who have similar objectives and are driven by longer term success.

Private equity isn't for anyone, as the pressure is much higher than in banking, but it is much more rewarding. It can be very frustrating at times, as closing deals can take longer than planned; finding the right opportunity, dealing with difficult seller etc. But once you have done your work and executed an investment that you truly believe in, it is much more satisfying because then you realise you have an ownership in a company and you are responsible for its future success.

The author has worked in the financial sector for ten years, latterly in investment banking, and moved to a Gulf-based private equity firm earlier this year

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