Private Equity Recruiting Process

The lion’s share of the recruiting process for pre-MBA private equity associates truly begins in the first year of standard investment banking and consulting analyst programs. This may surprise some people, but the recruiting cycle is very structured, even though it can start at a moment’s notice (depending upon when the leading firms in the space begin their process). Prospective private equity candidates must be ready for the process early in their investment banking analyst programs in order to be successful in landing a private equity job. That said, recruiting for some other PE jobs will take place year-round. Thus if you happen to miss the main recruiting process for PE jobs, you’re a leg down, but not out. You may still be able to find available opportunities. This chapter will detail this timeline more thoroughly.

The pre-MBA recruiting process for PE positions is truly unique. After banking, exiting to a position as a private equity associate is very prestigious, and PE firms want to make sure that they don’t miss the most qualified applicants. You’ll need to be prepared for the process to start at any time. Once one of the leading PE firms begins its search for the incoming associate class for its firm, the rest of the firms will generally start recruiting directly afterward. For the majority of the firms, the entire recruiting process will be finished within several months once the leading firms start recruiting.

This “leader and followers” pre-MBA recruiting process is primarily driven by the “megafunds” (KKR, TPG, Blackstone, etc.). When they decide to start the recruiting process, most of the other large PE firms, with associate classes ranging from 8-15 professionals per year, will then launch their processes right away. The middle market/smaller PE firms will typically follow shortly after that.

Note that venture capital firms and smaller private equity firms will typically recruit outside of this standard recruiting cycle, and thus the notes above about the process tend not to apply to them. That said, overall most hiring for next year’s summer start dates will be completed by July or August—nearly a full year in advance!

The competition for these jobs is very tough. You’re going to be up against a large pool of talented, driven investment bankers, and will be working against a tight timeline. Therefore it’s very important that you plan out your process well ahead of time.

Even before the official private equity process begins, the initial step for pre-MBA recruits is to meet with headhunters. They are essentially the “gatekeepers” for the interviews with most firms. Headhunters will contact a pre-MBA candidate in the first year of his/her analyst program (up to three months in advance of the start of the recruiting season).

For post-MBA candidates, note that the recruiting process is a bit different. These candidates can rely a bit more heavily on their graduate schools’ career centers, since most PE firms will go directly to MBA program candidates to begin recruiting them. In this respect, post-MBA recruiting is more predictable and standard, as it conforms to the overall MBA student recruiting timeline.

The typical recruiting cycles for pre-MBA and post-MBA associate positions are illustrated below:

For pre-MBA candidates, after the headhunter interview the candidates go on to meet with the private equity firms directly. The overall process is a lot faster and more intense than investment banking. Candidates in this process truly need to be prepared for anything and everything. The recruiting process can be over very rapidly! A specific firm’s interview process can range from days to weeks, depending on the market conditions, how many firms are recruiting at the same time, and how quickly the firm in question finds prospective associates it wants to hire and who want to work for them.

Some investment banking analysts recruiting for PE firm jobs have encountered first-round interviews called “super-days,” where they meet with 8-10 people in one day and receive full-time offers at the end of the day. If this occurs, the PE firm will expect the candidate to accept (or reject) the offer within a few days! In other cases, the process is a bit slower, with several rounds of interviews spread out over a couple of weeks.

The traditional components of a private equity recruiting process include the standard behavioral and technical interviews conducted by junior PE associates—this part of the process is similar to investment banking recruiting. Where the process differs is in two primary places: the testing for investing acumen, and the testing for superior and LBO-specific technical ability.

Testing for investing acumen can come in the form of a broad 20-minute, consulting-like case study, or a detailed 3-5 hour investing exercise wherein the candidate has to research a company, go through the company’s filings, and write an investment memo on the sample target company. Unlike in a hedge fund recruiting process, PE associate candidates will very rarely be asked to pitch an investment idea. Instead, they may be asked what characteristics they would look for in a good LBO candidate.

LBO-specific technical ability screenings can come in the form of a financial modeling test, such as a paper LBO (in which the candidate must do LBO math in his/her head or on a piece of paper), or in a several-hour modeling test wherein the candidate has access to a computer and Microsoft Excel. Different firms like to administer this portion of the interview process differently, so for example, some will have modeling tests at the beginning of their process, while others may have it as the last stage of the process.

Therefore, you need to be prepared for every possibility if you hope to maximize your chance of landing a private equity associate position successfully. That said, don’t be afraid. The following sections and chapters in this guide will help you navigate the recruiting cycle and also help to prepare you for the modeling tests.

Initial Preparations: Before Headhunter Recruiting Starts

Given the short timeframe of the recruiting process, investment banking and consulting analysts need to be as prepared as possible for the process to start. In addition, no one knows exactly when the recruiting process is going to start until it does!

The first thing to do, then, is to make sure you’re interested in private equity. If so, make sure you understand the industry thoroughly, and know what the firms in the industry are going to be looking for in a good candidate.

The key thing that private equity firms look for is that the candidate is skilled at thinking like an investor rather than just being capable of performing the tasks needed for deal execution, which would mean being skilled at operating like an investment banker. Remember, private equity involves making successful investments rather than cranking out many transaction closings. For the banker, the firm’s revenue and profit are not affected by the post-transaction performance of the clients. In private equity, the firm’s success is heavily dependent upon how the client/target performs after the transaction is completed. Therefore, a successful PE associate will need to be able to help his colleagues make successful transaction decisions.

If this does not sound like something you’re interested in doing, then PE is probably not the right destination for you. If it is, then you will need to know how to best position yourself and market yourself to the interviewer with all of this in mind. Start thinking like an investor now, if you’re not already doing so—it will pay huge dividends for you when the PE recruiting process begins.

Private Equity Headhunter Interview

Now that you know how to prepare for the early stages of the PE recruiting process, we’ll discuss what the headhunter interview entails. Recruiters, or headhunters, play a large role in private equity searches. These recruiting firms source top candidates for private equity interviews. Traditionally, headhunting recruiters seek out and work with top-ranking first-year analysts at investment banks and top-tier consulting firms. Recruiters are essentially the “gatekeepers” into the private equity industry, so candidates need to take these relationships very seriously.

A good headhunter interview can make a tremendous difference in the number of PE interview opportunities a candidate will be presented with. It is very important for candidates to realize that headhunters are working for their private equity clients, and will therefore only show candidates that they believe are sufficiently qualified for the client and fit the firm’s criteria. If you do not come across as highly qualified and a good fit for the client, the number of opportunities you will be given will certainly suffer as a result.

Headhunters will often reach out to prospective candidates in their first year as analysts, often within 4-6 months of being on the job, so bankers need to make sure they’re ready early on in their analyst position if they want to do well in PE recruiting. For those who do not receive phone calls from headhunters, it doesn’t mean you are not desirable; it simply means you may have to reach out to the recruiters yourself. Well-known private equity headhunters that you can reach out to include SG Partners, GloCap, CPI, Amity Search Partners, Oxbridge Group, and Search One.

Important! Headhunter Interview Tip: Make sure not to give the recruiter/headhunter any attitude. You are one of many candidates with whom headhunting firms will be working, and headhunters will have no problem never working with you again. They need to feel confident about you being a strong candidate, and just as importantly, being presentable to their own clients. Displaying an attitude of “you will make money off of me” is just not a good way to get the attention you want. Your attitude should be confident, yet humble, thoughtful and gracious.

Private Equity Interviews

The Behavioral Part of the Interview Process: If the headhunter is comfortable putting you in front of his/her private equity clients, your resume will be submitted to the PE firm for selection. If selected, you will begin a typical interview process that will most likely consist of 2 to 4 rounds of interviews. On the first round, the private equity firm will host numerous 30-minute behavioral interviews to make sure you have the right background, strong communication skills (for example, to make sure you are capable of engaging appropriately with investment target companies, portfolio companies, bankers, and consultants), and that you have thoughtful, genuine reasons for pursuing a private equity career. Make sure at this stage to describe what sets you apart from the other candidates. That’s how you’ll stick in their memory and stand out from the dozens of other applicants.

The Technical Part of the Interview Process: If you receive a second-round interview, you can expect to reach the more technical part of the process. Typical private equity firms look to hire pre-MBA and post-MBA associates who have very strong financial accounting and modeling skills, and an appetite for quantitative analysis and data-driven decision making. Be prepared for technical questions similar to ones you received in the investment banking interview process. One major distinction in private equity interviews, though, is that candidates will often have to complete a financial modeling case study that illustrates his or her proficiency in financing modeling and accounting concepts. Candidates could be tested on this in a variety of ways, including analyzing a full LBO model, a growth capital case study, a paper LBO, or a consulting-like case study. A candidate may be handed one sheet of paper that consists of various assumptions and/or a laptop computer that has a blank excel sheet to build out an investment scenario. These modeling tests will be detailed later in the guide.

Some sample technical questions include:

Sample Questions to Ask

During the PE associate interview process, you will have the opportunity to ask the interviewers a few questions that will show them how interested you are in working for the firm. The following list provides good examples of questions to ask to demonstrate this interest.

The questions you ask should be selected carefully so that you receive the maximum amount of information about the job. This information will help you select the right firm for your background and personality. You will want to make sure you work with a group of people that you can get along with and will enjoy working with as part of the investment team. You will be spending a lot of time with this group, and making the right choice is critical.