Mastering the Art of the Private Equity Interview 🎨

For better or worse, the mad dash of on-cycle private equity recruiting often occurs over a matter of mere days. In that time, you may have one singular thirty-minute opportunity to make a good impression on the firm of your dreams.

Depending on how that goes, you may be selected to advance to later rounds or eliminated with the door to that job potentially shut forever. Given the density with which firms pack interviews into a short time period, you may have the opportunity to interview with only a handful of firms at most.

Like it or not, the truth is that years of preparation to get into private equity – getting the best grades in undergraduate studies, padding your resume with extracurriculars, landing that prestigious banking job – all come down to these crucial interviews and it is incumbent on you to do the right preparation ahead of time to maximize your odds of success. Of course, there are opportunities to break into private equity through off-cycle or non-traditional paths, but statistically speaking your best odds to land one of these highly desired roles is to do so via on-cycle recruiting.

That begs the question: what can you do ahead of time to make sure you are as prepared as possible?

As table stakes, you’ll want to ensure that you are rock solid with your technicals. That covers the full gamut from basic accounting (walk me through how ten dollars of depreciation impacts the three financial statements) to more advanced valuation and leveraged buyout questions. Unlike in your banking interviews, interviewers in private equity will probe to see how much you understand beyond what online guides are telling you to regurgitate. How do you react to a curveball question you haven’t seen before? Do you really understand the linkages between the financial statements, or did you just memorize the answer to the usual questions?

To maximize your chances for success, make sure you are practicing your mastery of technical concepts. This means understanding the concepts and their applications rather than rote memorization of long question lists. Practice your Excel modeling and paper LBO work until it becomes second nature, and realize that it is much more difficult to do this sort of work in a high-pressure environment where a senior private equity professional is watching your work, or you have a short timer before you have to turn in a deliverable work product.

All that aside, you should assume that all of your peers will also be locked in on their technical preparation. Correctly handling most or all of your technical questions will never get you the job, but making serious missteps here will have you eliminated very quickly.

The first area where you can really set yourself apart is having a compelling vision and narrative for why you want to work in private equity. Hint: doing it because it is the next step in the prestigious career ladder of Ivy League school plus investment banking does NOT qualify as a compelling reason.

I’ve conducted countless Megafund private equity associate interviews, and it was always easy for me to identify candidates who were doing private equity recruiting and simply “going through the motions”. Full disclosure: it is OK if you don’t have a great reason for entering private equity, but you would be best served to come up with one before you begin your interviews.

To craft this narrative, you should ask yourself why it is that you want to do private equity in the first place. At its core, private equity is a fundamentally different job than the investment banking role from which you are (most likely) coming. Do you have a genuine interest in being an owner of a business rather than an advisor to businesses? If so, why? It could be due to personal experience (you worked for or started an operating business when you were younger) or something you saw as professional (worked on an interesting private equity transaction in banking). This answer is going to differ for everyone, but having a logical, genuine explanation for why you are interviewing for these roles in the first place will go a long way toward setting your candidacy apart.

Next, you should have a firm grasp of the specifics of the firm you are interviewing with. I’ve noticed that many interviewees think of private equity as one undifferentiated strategy, whereas the reality is far from that. There are firms that focus on buyouts with intensive operational components (such as Bain Capital) and those that focus on more complex situations where more value creation occurs at the time of acquisition by virtue of valuation and structuring (such as Apollo and Centerbridge). There are firms that focus on specific industry verticals, such as Vista and Thoma Bravo in technology or Sycamore in consumer and retail. Other firms may pursue buy-and-build strategies where portfolio companies are used as platforms to consolidate specific industry niches. Of course, firms do not fall neatly into any individual bucket and often move between strategies, but understanding where your target firm sits is important to show you understand the role you are interviewing for.

One way to do this is to stay up to date on the recent transactions that your target firm has executed. If you can, find out as much as possible about their investment theses on these deals (such as by looking at the CIM for the acquisition financing) and try to contextualize that in the context of the firm’s stated investment strategy. To the extent you’re able to fold detail from these things into your interview responses, you’ll go a long way to showing you are capable of differentiated research and that you took initiative to set yourself apart from the pack.

Lastly, you would be well served to take a holistic look at the private market as a whole to understand how the market environment is impacting the firm you are interviewing for. For example, you may be an M&A banker, but private equity activity since the middle of 2022 has very much been impacted by leveraged finance market conditions. With many hung deals on bank balance sheets, there is little appetite for banks to participate in the broadly syndicated committed financings necessary to support robust LBO activity. Even if leveraged finance is not your specialty, it will be important to be fluent in these topics so that you can speak intelligently during your interviews. Beyond that, you should have an opinion on what your firm can do given that the firm is still responsible for deploying LP capital – should they look to private credit, or consider over-equitizing deals with the expectation of refinancing when the market improves? Whatever you suggest, showing that you can “talk the talk” like a true private equity professional is an important quality.

Entry-level associate roles are the most surefire way to break into the closely guarded private equity industry. Given the limited chances available to secure these seats, make sure you do everything you can to diligently prepare and put your best foot forward on interview day. Good luck!

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