How to make it through private equity interviews and get the job

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private equity interview

There’s one big reason that people want to get a job in private equity: compensation is generally excellent and is improving at a faster pace than any other industry in financial services. Unfortunately, there are also two main reasons why most people don’t get the job. The competition is fierce – a single entry-level role will receive around 300 applications – and the interview process is notoriously difficult.

“Private equity interviews are incredibly competitive, and you don’t get many chances to practice,” says Gail McManus, managing director of Private Equity Recruitment. It’s important, therefore, to know what’s you’ll be facing.

Stage One: The fit interview

Due to their diminutive size, at least when compared to investment banks, private equity firms prioritize cultural fit more than most companies. Some PE firms have been known to employ “the beer test” or “flight test,” where every interviewer reports back on whether they would enjoy having a drink with the person or spending time travelling with them. Essentially, they’ll only hire you if you’re likeable. Of course, likability is subjective and not something you can perfect overnight. But you can prepare for the two generic “fit” questions that nearly every firm asks to weed out candidates early: Why do you want to work in private equity? And why do you want to work for this firm?

“If you can’t answer [these questions], which is simply a case of doing your homework, then the private equity firm will make the rest of the interview very uncomfortable,” says McManus. “All the PE firm wants to know is that you’re not wasting their time.” Bad answers include long-winded stories about your career aspirations and your longing for the buy-side. Good answers suggest to the interviewer what you can bring to the company.

Check out recent deals, target companies, and say something that shows a genuine interest in the company you want to work for. “Summarize your experience in the context of their firm – why are you going to be useful to them?” advises McManus.

You might want to say: “My recent experience focusing on XXX sector has given me a good sense of the investment opportunities available, and my valuation and modelling experience ensures I can make sense of the different businesses in this sector. I’d like to apply these skills in a new area of the financial industry.”

Stage Two: The skills test

You may have managed to polish up your interview skills, impressed in the first round and made it through to the (very) shortlist, but this is where the nitty gritty ability to do the day-to-day job is assessed. The skills test will usually comprise of two elements – a case study presentation and an hour-long test of your financial modelling skills.

In the case study, candidates are given a certain amount of information about a company and then asked, simply, whether they would invest in it or not. This is, after all, pretty much the day job. A favourite trick of PE firms is to throw in a portfolio company, with weaker candidates often seizing the opportunity to say what a good investment it is.

“You don’t know if it’s a company they wished they’d never bought, so don’t assume you need to be positive,” says McManus. “The key here is to highlight the difference between a good business and a good investment. A poor performing company might be an awful investment, but if the business has potential, it’s up to the PE firm to spot that potential. Take a view, have an opinion even if it’s contrarian – PE firms will not hire sheep.”

The modelling test is only an hour, so it’s never overly complex. A lot of candidates over complicate the model and, in a time pressured environment, fail to complete the task – over-stretching yourself within a tight deadline is most people’s downfall, says McManus.

Stage Three: The hob-knobbing

At this point the job is yours to lose. You will most likely be taken out to lunch with senior team members who will assess whether they can trust you to face clients and whether they can work with you. It’s ostensibly an informal occasion, but you need to be on your guard, as saying the wrong thing can undermine all that you accomplished during the first two stages. Senior partners can obviously veto any potential hire.

However, this is also your chance to switch from seller to buyer. The firm likely wants you to work for it at this point, so it will be selling its work environment; you’ll also spend time with someone at a similar level to the role you’re applying to who will give you an idea of the day to day job.

The final stage is essentially due diligence, but it’s still possible to mess it up. Never mistake being casual or cocky with being confident, said Robin Judson, the founder of recruitment firm Robin Judson Partners,

After this it’s all over – over the course of the three interviews you will have most likely met with seven to 10 people within the business, from juniors to partner level as well as HR. “Think of it like a PlayStation game – each level leads on to the next until you meet the big boss,” says McManus.

Paul Clarke contributed to this report.

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