by Brian DeChesare Comments (16)

Off-Cycle Private Equity Recruiting: How to Win Middle-Market Private Equity Offers

Off Cycle Private Equity Recruiting
What happens if you don’t follow “the path”?

I’ve written many stories about readers who broke into investment banking against all the odds, overcoming non-target schools, low GPAs, and a lack of work experience.

But… what next?

Even if you succeed the first time around, can you win exit opportunities such as private equity?

I wanted to find out via some firsthand accounts, so I recently spoke with a reader in that same position.

He came from a non-target school, had no prior banking internships, and won a full-time IB offer at the last minute.

And he won an offer at a middle-market private equity fund, mostly through his own networking and preparation efforts:

Off-Cycle Private Equity Recruiting: How to Network and Win Interviews

Q: Can you summarize your story for us?

A: Sure. I came from a very random background – a non-target school and only a private wealth management internship – and got into investment banking at the last minute via an intense networking effort.

I won an offer at an “In-Between-a-Bank” (IBAB) – think HSBC, RBC, Wells Fargo, etc.

In my first year at the firm, I went through the on-cycle private equity recruiting process, which began in January back then (it’s much earlier now – more like ~2+ years in advance of your start date).

I started preparing for PE recruiting right after I started in August, and I began a more serious effort in October.

That meant reading every interview guide I could find, completing case studies and modeling tests, outlining my deal experience, and figuring out which funds I would target.

All my deals had been in the middle market, so I put together a list of ~10 middle-market PE funds that I would focus on.

I made it to a few final rounds at upper-middle-market funds but did not win any offers in the first stage of on-cycle recruiting.

By contrast, Analysts at elite boutiques and bulge brackets would often interview in a single day, receive offers, and be finished.

After the first round, I shifted my focus to off-cycle private equity recruiting at smaller funds and ended up winning an offer at a middle-market fund.

Interviews in this off-cycle private equity recruiting process often took several weeks to a month, and there was less competition from bankers at larger firms.

Q: OK. Can you explain how you networked to win these interviews?

A: Even if you have contacts at private equity firms, you will almost always have to go through headhunters because most firms outsource their recruiting.

But if you’re at a smaller bank, they won’t reach out to you as proactively; you’ll have to use referrals to get in touch with them.

Networking was quite different from networking for IB roles because it was difficult to cold email or cold call Analysts and Associates and set up informational interviews.

They were busier and less receptive than bankers, and I always had better luck reaching “alumni” from my banking group who had left for private equity.

In some cases, I asked them directly about recruiting at their firms, and in other cases, I asked for introductions to recruiters.

Q: So, are you saying that it’s not a great idea to set up informational interviews and go through an extended networking process?

A: If you start far in advance – say, your last year of university – then you can conduct an extended networking effort.

But if you’re starting a few months before recruiting begins, stick to a more targeted approach based on bank alumni and recruiters.

Q: How should you think about the overall private equity recruiting process?

It seems like many bankers start their jobs without a clear idea of what to expect.

A: First, you must decide earlybefore you even start your full-time job – whether or not you’ll go through the PE recruiting process in your first year.

Second, you need to maintain realistic expectations about the firms you’ll focus on, given your background and experience.

For example, if you’re not at a BB or EB bank, it is a waste of time to target mega-funds, even if you have solid academic and deal experience.

If you decide to recruit for on-cycle PE roles in your first year, you have to go all-out, even if it means under-performing at work.

If you make a half-hearted effort, you don’t receive an offer, and then you go through the process again in your second year, the first question in every interview will be: “What happened the first time around?”

Many candidates wait to close a deal or work on a high-profile M&A deal, but those are often outside your control, so I think it’s a poor idea to delay recruiting just for one of those.

It’s smarter to spin your pitches into sounding like deals and recruit as soon as possible.

How to Prepare for Private Equity Interviews Efficiently

Q: On that note, what tips do you have for interviews?

A: All candidates read the same interview guides, so you can’t just memorize the same questions and answers as everyone else and hope to succeed.

My #1 tip is to spend the bulk of your time researching the fund you’re interviewing with, from their portfolio companies to their exits and investment strategies.

Everyone else will have similar-looking work experience, so fund research is the best way to set yourself apart – especially in off-cycle private equity recruiting, where “fit” is even more important.

Regarding technical questions and case studies, many guides and courses have basic, intermediate, and advanced models, but the advanced models are a waste of time.

I’ve never built anything as complex as some of these advanced models, either on the job in banking or in PE interviews.

Instead, I focused on a basic model that I could build from scratch.

You need to know how to build a 3-statement model and add an LBO on top of it.

Beyond that, the bells and whistles are unimportant; people tend to struggle because of time pressure more than anything else.

Q: OK. What should be in this “basic model”?

A: If you assume a 60-minute completion time, I would say:

  • A Purchase Enterprise Value calculation.
  • A Sources & Uses schedule.
  • Debt assumptions.
  • Simple revenue and expense assumptions.
  • Cash flow projections that start with the Income Statement and end at the Free Cash Flow calculation.
  • A Debt Schedule with 1-2 tranches of Term Loans, Subordinated Notes, or Mezzanine, and a Revolver.
  • And a simple returns calculation and 1-2 sensitivities at the bottom.

Skip full 3-statement projections, detailed Working Capital calculations, purchase price allocation, complex Debt schedules, scenarios, and fancy returns calculations (returns to lenders, earn-outs, waterfalls, option pools, etc.).

These topics are “good to know,” but something like the Goodwill calculation just does not affect returns in a material way, so it’s not worth including in a time-pressured model.

Aim for 150 rows or less in a single spreadsheet.

If you have 2-3 hours, the model should include the full 3 statements (though they can be simplified) and Balance Sheet adjustments for the transaction.

Still skip the complex Debt schedule and complicated returns calculations.

A good target is 300 rows or less in a single spreadsheet.

Almost everything else is in the “bells and whistles” category: Depreciation schedules, original issue discount, call premiums, dividend recaps, different exit types, credit stats/ratios, stub periods, etc.

Unless they tell you specifically to include one or more of those, leave them out to save time.

Q: Besides the fact that many models are overly complex, what else is missing from current resources, articles, and guides?

A: The main problems are:

  • Too much unnecessary information – You don’t need to know about the history of the private equity industry or brain teasers.
  • Lack of detail on different processes – Off-cycle private equity recruiting works quite differently from the on-cycle process, and most guides do not explain mega-fund vs. middle-market interviews (for example). Interviews are also quite different for candidates with the elite university/top grades/top bank background vs. ones who are missing one or more of those.

 It would also be helpful to see examples of candidates who won PE offers from different backgrounds.

  • Not enough information on deal discussions – I haven’t seen great explanations of how to spin your pitches into sounding like deals, and this point is quite important in interviews at all types of funds.

You’ve covered many of the points above in previous articles on M&I, so if you wanted to create a PE interview guide, you could combine the previous coverage into one resource.

Q: Thanks for the suggestion!

Is there anything else you want to add?

A: There’s a lot that you cannot control in the process, such as the timing, your interviewers, your university, your GPA, and your current bank.

So, you need to focus on the parts that you can control, such as your answers to “fit” questions, your deal experience, and your ability to finish modeling tests on-time.

If you do that and you start the recruiting process before your full-time IB job begins, you should be able to win offers – even if they’re not at your ideal firms.

Q: Great. Thanks for your time!

A: My pleasure.

Want More?

You might be interested in reading:

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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  1. Thanks Brian – what would recommend for interview prep for IB analysts recruiting for MM PE roles?

    1. Practice with both structured and open-ended LBO case studies. Know your deals very well.

      1. Makes sense, thanks for the response. Do you have a PE interview guide available on your site, similar to the BIWS IB Interview Guide?

        1. No. It is 90% overlap with IB, so pointless to maintain a separate guide. And there are many LBO case studies in the interview guide and modeling course.

  2. Hi Brain,

    Thanks for all the information you put out, literally changed more life.

    Do you have an article that talks about the main difference between working at a BB bank PE division and a firm that is a PE firm ?

    Thank you.

    1. Thanks. No, we don’t have anything on PE at large banks vs. dedicated PE firms currently.

  3. Hi Brian,
    I am from a non- target school and I have interned as an investment analyst at two big banks. I don’t have a background in IB. I have a 3.9 GPA. I speak Mandarin and I have studied abroad. I have a lot of leadership experience not associated with finance tho, but with volunteer work and diversity. I am also a minority student and I graduate December 2020. ( I was exposed to the finance world pretty late).

    I want to get into Private Equity and begin work in 2021. Do you have any insight on the off cycle/ on cycle timeline of PE for undergraduates trying to get full-time ? What type of firms do you recommend I should apply to and why ?

    My internship at as an analyst at one of the big banks is about start, how do you recommend going about asking for an interview for a PE role. (As a result of Covid-19 internships are virtual and shortened so I am not sure they still offer that opportunity, But I have not asked yet. ) The firm is not a top in Private Equity, but I believe it might be easier because I already have my foot in the door.

    Thank you

    1. There is no real on-cycle timeline for undergraduates other than the usual fall recruiting for full-time roles. Please see:

      In a normal year, you might have a good shot at these roles, but with the current crisis it’s anyone’s guess whether or not the large firms will be hiring undergrads. Many are going to have dozens of bankrupt portfolio companies. My strong recommendation is to win a full-time return offer at your bank and then hope it sticks around until your start date.

  4. Hi Brian,

    Love the article. Wondering if you have any advise for someone’s who’s looking to break into US HF from oversea? Graduated from top US university and currently first year at a BB bank in oversea headquarter (London or HK). Thanks!

    1. I think it’s going to be nearly impossible unless you first win a HF offer at a larger fund in your current location and then ask to transfer to the US. Otherwise, most hedge funds will not want to bother with the work visa paperwork and everything else that goes into hiring non-citizens. So, you should focus on winning a HF offer in your current city first, ideally at one of the big funds, and then pushing for a transfer once you’ve been on the job a while.

      1. Thanks Brian. I actually do have the status to work in the U.S. (greencard holder or citizen), would that change my approach? Thanks.

        1. That definitely makes it easier, but it still tends to be tough to apply for these roles across different continents. Luckily, with a virus outbreak raging in the current environment, firms might be open to interviewing you remotely without any in-person trips required.

          So… maybe start reaching out via LinkedIn and email and find funds that match the strategies you’re interested in, in the US. There isn’t really a set time to recruit for these roles because most HF recruiting is off-cycle, so you can do it as soon as you think you have enough experience to speak about in interviews.

  5. Hey Brian,

    Can you say more about what happens after you get recruited for a buy-side job your first year at a bb? You mentioned before you could stay on at the bank and your job might not start for another 1.5/2 years… what happens during that time. “lame duck…” are there follow up interviews or anything? Also, does your job usually offer a signing bonus upfront or a noncompete or something so you don’t/can’t change your mind during that 1.5 years before you start?


    1. We cover the process here:

      There are no follow-up interviews, so you just complete your IB job and continue to work on deals. Everyone just accepts that this is the way it works. You wouldn’t receive a signing bonus so early, likely just once the new PE role starts. I don’t think you would have to sign a non-compete, at least not for junior-level roles.

      Basically, PE firms know that you’re extremely unlikely to change your mind because the process starts so early, moves so quickly, and is ultra-competitive. Anyone changing their mind probably just lost interest in finance altogether.

  6. Heh Brian, great article. Rising sophmore at a target here, getting ready to start networking for IB. Nowadays, would you recommend I reach out to alumni via LinkedIn or stick to cold emailing their work email address, if I guess it correctly? And if you recommend LinkedIn, should I request to “add” the contact before asking for an informational interview, or use the LinkedIn Inmail directly? Thanks!!

    1. Cold emailing still works better than LinkedIn messages (I have thousands of LinkedIn messages but ignore them because most are irrelevant, whereas I always at least look at emails even if I don’t respond). If you really can’t find it, you can send a LinkedIn message. Try to get a premium account or trial for it if you can so that your message has a higher chance of being read. You can use InMail directly without adding the person first.

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