Tips for Acing Your Next Private Equity Interview

Jul 01, 2021 | Article

Whether you are Pre-MBA or Post-MBA candidate, the most crucial part of getting into the private equity industry is cracking the interview. You may have all the skills to become a Private Equity professional, but if you don’t perform well in the interview, you may never get the chance to prove yourself on the job. Here’s a quick roundabout of what the private equity recruiting process looks like and what it takes to get in.

How a private equity firm sizes you up for a job is not much different from how they vet and perform due diligence on their potential investments. When recruiting, they seek proven achievers and top performers to work for them. The professionals with the caliber to optimize investments and returns on portfolios.

In essence, the recruitment bottom line in private equity is to find people who will prove to be a good investment – in both terms of time as well as money.

So, how do they reach this decision? And what can aspirants and practicing professionals wishing to secure their dream job in private equity do to prepare for the recruitment process?

In this article, we understand the number of rounds a typical PE interview process comprises, the type of questions the interviewers ask from pre-MBA and post-MBA candidates, and much more.

Know your recruiting cycle

The recruitment cycle in private equity depends upon the type of firm you interview at, the time of the year, and most importantly your educational level – if you are in the pre- or post-MBA phase.

Firms with large PE funds usually aggressively pursue the candidates with brand names and bulge-bracket experience on their resumes. These leading firms are usually followed by other large PE firms with associate position vacancies, and the mid- and small-sized PE firms follow shortly after to launch the recruitment process.

This order is typically followed in recruitment and interview cycles at both pre- and post-MBA levels. Overall most hiring for the next year is completed by August at the most, i.e. a full year in advance.

At the pre-MBA level, recruitment is majorly driven by mega-funds, such as KKR, TPG, and Blackstone, among others. That said, other large funds and middle-market or smaller PE firms also launch their recruitment drives for pre-MBAs from time to time.

For PE associate programs, the recruitment usually starts in April and can continue through August.

Prospective pre-MBA PE aspirants must be ready for the interview process early in their investment banking analyst programs in order to be successfully considered for the PE job. Another important step for them is to meet the headhunters much before the recruitment process begins.

Headhunters are the “gatekeepers” who usually contact the aspirants in the first year of their analyst program at least three months before the recruiting season begins. Therefore, make it a point to meet them and communicate your interest in the firm well in advance.

At the post-MBA level, the recruitment process is slightly different. These aspirants usually count on their graduate school’s career centers for communication as most PE firms directly approach them for recruitment. It makes private equity recruitment for the post-MBA level much more standard and predictable.

The typical recruiting cycles for pre-MBA and post-MBA associate positions at Private Equity firms are illustrated below.

Street of Walls

That said, PE recruiting can continue year-round. If you miss the main season, know that you are only a leg down; don’t consider yourself out of the game yet.

Number of interview rounds and type of questions

Private equity or leveraged-buyout funds usually conduct three to four rounds of interviews. For junior positions, however, the interview rounds could sometimes be as few as two.

For pre-MBA interviews, the initial rounds constitute a mix of penetrative questions about quantitative (say, financial modeling) and qualitative (overall investment strategy) skills.

If you clear the initial round, the type of questions asked will remain the same in further rounds, but they will be asked by different people during the course of your interview. Why? In addition to testing your knowledge, this is also a test of your endurance as to how well you stay engaged with the interview process and if you can provide consistent and intelligent answers throughout.

To talk of elimination, by the middle round, the firms usually narrow the initial group of candidates to the best fit. So, the group may go from 20 candidates in the first round to 10 in the second round, and 5 in the final (of which one or three may be hired).

The middle round is also when a candidate decides if she should continue interviewing at the firm.

For current- or post-MBA interviews, there maybe three to four rounds. However, you will not usually be interviewed by junior professionals. Those either at the same level or above the position you are applying for will likely interview you.

That said, you may meet some of the junior investment professionals in the initial round, but you are advised not to let your guard down. This could be a part of the interview screening process to see your communication and leadership with juniors.

You can expect to meet a few fund partners in the late rounds. For large firm interviews, it may also mean being interviewed by the partner in the industry group you are appearing for.

By the end stage, you are expected to have cleared the quantitative skills requirements, thus, the interview takes a more conversational and qualitative turn. However, don’t be surprised if you are asked a technical question. It can be done to test your preparation on-spot.

Beyond the hard skills, partners would majorly be interested in to reaffirm your interest in the firm. Since you have reached this stage, it’s likely that others have told the partners about your fit and skills. This step is your opportunity to prove to the partners that others did right in choosing you and you belong here.

What private equity firms seek in new recruits?

Exiting to private equity positions is considered very prestigious. Aspirants go toe to toe to compete against a large pool of driven and talented banking and finance professionals to land a PE job. Therefore, planning your approach during the interview and getting your ducks in the row is the best way to prepare and get ahead of others.

Here are a few skills and questions that are considered critical during a private equity interview.

1. Deal Skills

Your quantitative and financial knowledge and deal skills will be very important throughout the interview cycle. Brush them diligently to be able to prove your worth.

The level of deal questions asked will vary from pre-MBA to current or post-MBA candidates.

For pre-MBAs, the knowledge of financial models is crucial. They will be expected to tell about the models they built, and variables/drivers they used for the purpose. These modeling questions will majorly relate to the valuation of a potential portfolio company.

To give an example, you could be asked to calculate the free cash flow – an everyday topic for bankers, but still very important for interviews. You can also be tested on your understanding of financial statements, etc.

In addition, funds may try to gather if you can put together complex financial models and come up with accurate valuations. You could also be given a few 10ks and be asked to build a model.

So, be ready to walk your interviewers through how you constructed a model. Most likely, you will be told in advance if there will be a full-fledged modeling test.

You can set yourself apart by discussing other dimensions of your deal. Say, why it made sense to go for that deal. Similarly, if you worked on a merger, try to answer why that merger made sense and tell the big picture, along with demonstrating your technical prowess. That said, be careful when walking the qualitative line.

Always remember that you are being vetted for a modeling-intensive position. Good answers to “Why” questions will not make up for “Average” modeling skills.

For current and post-MBA students, the modeling questions are not that intense. You will perhaps not be directly asked to put together a model, but you will be tested on your previous deal experience. Be versed in discussing different aspects of your investments – how they originated, how you performed due diligence, valuation, negotiation/structuring, management interaction, and other strategic work that went into the deal. Get ready to be quizzed on your past deals.

Insider Tip

2. Personality-fit

The most important purpose of interviews is to gauge the personality and potential fit.

You may have a brilliant resume, but your ability to fit in, and the hiring fund’s impression of you becomes a huge factor in determining if you will be extended an offer.

Most of the time private equity recruiters focus first on assessing the qualitative skills and then the personality of the candidates – the two important masts of PE interview success.

The reason why personality is so important in private equity jobs is simple: even though it’s a large firm with billions of dollars in investments, they usually are run by a dozen to 100 people at most. With these few people handing the assets under management, the firms want people who can feel comfortable working with others on a regular basis, and vice-versa.

To this avail, many firms give personality assessment tests to the candidates after the final round, which helps them assess fit within different team environments.

3. Case study analysis skills

Many interview processes use case study tests. With it, the PE firms try to test your reactions on spot. They measure your thought processes and see how insightful or resourceful you can be. What more? Case studies also prove to be a good assessment tool of your performance under pressure.

When preparing for case study tests, expect surprises!

To give an example, a PE fund can put a candidate in a room full of industry publications and give a couple of hours to figure out the best investment leads from them and present the reason as to why they are good.

You could also be given a few days to review a business plan and present your analysis and plan to the mock investment committee.

4. Soft skills

The value of soft skills is highly underplayed by the aspirants in the interviews. You could be a top banker or consultant with an inside out knowledge of your deals, but unless you master the human element of one-on-one interaction, it would be hard for you to prove your worth for the senior-level PE positions.

Beyond the hard skills, your maturity, communication skills, and leadership are significant sway factors in securing a PE job.

Regardless of the size of the fund, your rapport building, and communication skills will matter. Most funds are close-knit groups and look for people with personalities that can not only fit in with people in the firm, but also the clients and investors outside of it. Interviewers will want to see how you interact with fellow professionals, vendors, executives, investors, and other portfolio companies.

5. The “Why PE” Question

At some or several points of the interview, you will be asked the big question – “Why you’ve chosen to pursue a career in private equity?”

Though simple sounding, a wrong or wobbly answer to this can leave a bad impression. Firms look for a genuine and well-thought answer to this question.

Think deeply about your motivation and passion for the PE industry. Frame an answer that shows your passion and knowledge for private equity and demonstrates your intent to create value and build your skillsets in the field. Most importantly establish a rationale particular to why PE industry as opposed to investment banking, venture capital, or hedge funds. You can also discuss your overarching career goals.

General Interview Tips

A few tips from professionals already working in the private equity industry to land a desirable private equity job:

- Do your homework. Research what the firm is about and the professionals you will be meeting. This entails understanding what the fund does, its portfolio companies, how long it has been around, its investor base, and the stage at which it invests. You can also research their latest investments and could go a step ahead to assess two or three companies to see how they fit with the fund’s overall strategy of investment. This homework will help you have intelligent conversation, be more involved, and ace on-spot case studies.

- Follow the right dress code. Although most firms portray themselves as a casual work environment, it’s always good to think twice before going casual in your interviews. A rule of thumb: when in doubt, wear a suit. Remember that you will not be penalized for over-dressing but may lose points for an inappropriate choice of attire.

- Always reflect professionalism in behavior. Some PE firms go out of their way in making the final round candidates comfortable. It can include wine and dine opportunities. What more? You could be flown to their offices on a Friday and stay there over the weekend. Always remember to maintain a level of professionalism – during the process, office dinners, and casual outings sponsored by the firm.

Landing a job

Irrespective of when you try to enter the private equity industry (pre-, during- or post-MBA), it goes without saying that the interview process is exhausting. It is true for all types of firms you interview at. You must put in all you can to prove your worth.

Preparation is vital, so are your credentials. As you prepare for the interview and practice the questions, completing certification and earning a professional designation relevant to private equity can conclusively establish your commitment to meet the rigorous standards of excellence in PE.

A designation by a third-party provider will get you many steps ahead of your compatriots in the interview process and give you the confidence to walk and talk the language of the industry.

Embolden your chances of getting into the world of private equity by earning the globally recognized Chartered Private Equity Professional (CPEP™) Charter designation by the United States Private Equity Council (USPEC).

To know more about the private equity charter designation, click here.

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