Why Private Equity?
So, you’ve made it through your first few months in banking alive. Your waist is bigger from all those tiramisu desserts, but luckily your bank account has gotten even fatter than your stomach.
And your bank account is set to get even fatter in the future – if you can successfully break into private equity.
While you know about the case studies and modeling tests you’ll get and the deals you’ll have to discuss, you haven’t put any thought into the “Why private equity?” question.
Which is a problem – because the last thing PE guys want is a banker or consultant who wants to do PE simply because he/she hates banking or consulting or because everyone else doing it.
Why Private Equity: Why Does It Matter?
While PE firms want people who are technically proficient (one reason why consultants face a more difficult time getting in, at least in the US), fit is even more important than in banking because firms are an order of magnitude smaller.
Whereas the top banks have tens of thousands to hundreds of thousands of employees, the biggest PE firms in the world only have a few hundred – and there are thousands of PE firms with fewer than 10.
Unlike banks, private equity firms have no need to hire an army of analysts to do grunt work: they’re not creating pitch books and competing for sell-side, buy-side, and financing mandates all day, and if they’re understaffed they can say “no” to potential investments.
The interview process can also be much more of an extended affair in PE, with many firms below the mega-fund level conducting interviews over months rather than the days or weeks you see in banking (the mega-funds do it much more quickly).
As a result, fit is critical and if the Partners doubt your motivations for wanting to do PE, they won’t give you an offer.
What NOT to Say for the “Why Private Equity?” Question
As with some other interview questions, there’s a temptation to say something stupid in response to “Why private equity?”:
- “I don’t like the hours in banking, and I want a better lifestyle.”
- “You can make much more money in PE because you’re an investor rather than an advisor!”
- “Well… all my friends are doing it!”
- “I want to control companies rather than taking orders from my MD all day.”
I doubt you would say anything this bad in a real interview, but your actual answer may not be significantly better, either.
All the reasons above are bad answers, for different reasons:
- While the lifestyle may be a bit better at smaller firms, it’s still far from a 9-5 job. And at mega-funds it’s banking all over again.
- The pay is also not that much better, especially when you first start. Yes, Steve Schwarzman makes more than any MD in banking but he’s also the Co-Founder of the best-known and oldest PE firm in the world, with 30+ years of experience.
- If you want to become an investor, you want to demonstrate independent thought as opposed to following what all your friends are doing.
- You don’t “control” companies as an analyst or associate, you manipulate spreadsheets.
In short, any variant of “I don’t like my current job and PE would be better because [Insert Reason Here]” is bad because it’s too negative.
And anything where you sound like you expect to conquer the world and become a trillionaire also sounds bad because it shows that you don’t have a clue about how the industry works.
Private Equity: The Promised Land? Fact and Fiction…
You might have had dreams of becoming a baller at KKR or Blackstone making $100 million per year, but you should pinch yourself and wake up since that will never happen.
I often group IB and PE together on this site because the work is not much different.
If you don’t like Excel, if you think EBITDA is boring, or if you have no interest in analyzing financial statements or reading about different companies, you should stop right now and do something more creative like advertising instead (I hear Don Draper is hiring…).
There are advantages and your role differs from what you do in banking, but if you fundamentally do not like analyzing and valuing companies, you’re going to hate it.
You do get more responsibility at certain firms, sometimes you’ll get to observe Boards of Directors and sit in on meetings, and you don’t get the stupid fix-the-printer-and-fetch-coffee tasks that you see in banking.
But please do not assume that it’s a night-and-day difference just because a bunch of 22-year old students in your finance club say it is.
Better Answers to This Question
To answer this question successfully, you need to avoid the clichés above and point out positive differences between PE and banking or between PE and whatever you’re moving in from (consulting, corporate development, etc.).
But you need to do that by highlighting what you’re looking for rather than what you don’t like about your current job.
Examples of solid answers to the “why private equity” question:
- You want to work with companies over the long-term instead of just on a single deal.
- You want to get exposed to the operations of companies and understand all aspects rather than just the financial ones (note: “exposed to,” not “control” or “improve”).
- You want to contribute to companies’ growth by looking at bolt-on acquisitions and other expansion opportunities that only an investor would be able to execute.
- You see yourself as an investor in the long-term, and want to learn all aspects of the process and how to evaluate whether a company can deliver solid returns.
It’s not “wrong” to make a direct comparison between PE and other fields (see the first 2 reasons) but you always want to downplay the negative part.
Ideally, you’ll tie the investments a PE firm makes to what you’ve done previously in school or work:
- The engineer-turned-banker has a much better story to tell if he recruits for a tech PE firm or growth equity firm and explains how he’s interested in applying his knowledge of IT and finance to investing in IT companies.
- If you’ve worked in Restructuring or Distressed M&A, you have a much better story if you recruit for a firm that specializes in turnarounds or distressed investments.
- If you’ve done consulting for restaurants or food chains, you’ll have a much better story to tell when you recruit for a PE firm that specializes in those types of investments, or even in the consumer sector as a whole.
- If you’ve done corporate development at a media or broadcasting company, you’ll have a much better story to tell when you interview with Bono at Elevation Partners.
The exact reasons depend on your background and where you’ve worked before, but you should combine these points – industry / company / deal focus + investing and working with companies in the long-term – to frame your answer:
- The banker would talk about how he wants to work with companies over the long-term and learn how to assess whether they can deliver solid returns so that he can become an investor in the future.
- The consultant would talk about how he wants to learn both the financial and the operational aspects of companies, and how he wants to be involved with decisions that a company implements rather than just recommendations.
- The corporate development guy/girl would talk about how he/she wants the opportunity to work with all different types of companies in the market rather than just one.
It’s not rocket science: highlight the positive differences between PE and your current field and why you’re interested in pursuing them as you transition into becoming an investor yourself.
If you’re coming from a banking or consulting background, you may get questions about PE vs. other exit opportunities:
Why Private Equity Over Venture Capital?
If the PE firm you’re interviewing with asks you this one, say that VC is too far in the operational direction for you, and how you feel it’s more about predicting the next Google/Facebook/Zynga than analytical reasoning.
You prefer PE because it’s a blend of both operations and finance and because you can help Founders with well-established businesses make them even better via solid analysis and research rather than just guesswork.
And, of course, if you’re interviewing for VC you want to take the opposite position and say that PE is all about financial engineering with little value-add and that you can truly help early-stage companies take off because they’re more in need of help than established ones.
Why Private Equity Over Hedge Funds?
For detailed coverage of this topic, please see our article on the hedge fund vs private equity comparison.
In short, this one is harder to answer because there are so many types of hedge funds, and the strategies used and the fund sizes can make for completely different experiences.
But the main difference between most hedge funds and most PE firms is that in PE you invest in entire companies (at least, in developed markets) whereas at hedge funds you make much smaller investments and it’s often closer to trading.
You prefer PE because you want to understand how entire businesses work – at a hedge fund you would only get the financial aspect and your skill set would be more limited.
Why Private Equity Over Corporate Development?
This one also has a more subtle distinction: the main difference is that in PE you look at all sorts of different investment opportunities and companies, whereas in corporate development the scope is more limited and you’re always looking at deals and partnerships for your own company.
So that’s exactly what you say in your answer: you want to gain a broader horizon and work in industries and sub-industries outside your own.
You’re more likely to get this type of question if you’re already in a corporate development role and you’re moving into PE – as a banker or consultant it’s not terribly likely unless you say you’re also interviewing for corporate development jobs (um, don’t do that).
Are Any of These Reasons True?
I mentioned above that many of the myths about PE (becoming a baller making $100M USD at age 25, buying countries, and surpassing deities) are untrue.
For all these “Why PE” examples I’ve been referencing the mix of operational and financial work and working with companies over the long-haul – so you might rightfully wonder if any of that is true.
It’s somewhere in between: some firms do focus more on add-on acquisitions and operational improvements, whereas others really are just about financial engineering and using as much debt as possible to boost returns.
Even if the firm you’re interviewing with is more focused on finance, though, you will still learn more about operations because you do a ton of due diligence before you actually invest (in banking you mostly just send these documents to other parties).
Unless you start or work at a real company, you’ll never learn the ins and outs of how it “really” works, but you will at least learn more than you would as a banker – so it’s more true than the bad “Why PE?” answers in the beginning.
Why Private Equity?
Hopefully not because you have delusions of grandeur and you’re planning out which beach in Thailand you’ll buy with your first $10 million.
Focus on the positive differences, link your reasons to your background and long-term goals (just like with the “Why investment banking?” question), and don’t fall prey to any of the bad answers about pay or lifestyle.
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Hi Brian, Would be a good response to why Megafunds over Middle-Market firms? Everyone talks about the money and the prestige but what would be a good response in an interview or headhunter setting?
Thank you so much!
More complex deals, more focus on technical aspects/modeling rather than qualitative industry analysis, etc.
It si s expected that one would apply to PE firms through headhunters. I just wanted to be sure that this is also the case with bigger PE firms such as Blackstone PE, CVC Capital Partners, KKR etc. Would it be worth applying through their websites or just hope to get approached by headhunters?
To have a chance at any of those firms, at least in the U.S./NYC, you have to be at a bulge bracket or elite boutique, have top academic credentials, and get headhunters to vouch for you.
I am 22 years old & at Final level of Chartered Accountant. I am already working with Deloitte from 2 years in Assurance Deptt. in India & willing to shift to US in PE sector next summer.
I have worked with Diverse Industries in past 2 years & have deep interest in operational & financial working of the companies which help them grow better. Have already been exploring my opportunities in PE side but not able to figure out how to crack in PE.
If you can suggest me something through which I can catch hold of attention of Partners in big/mid-seized PE Firms, then that would be really helpful
Thanks in Advance.
This article should help: https://mergersandinquisitions.com/private-equity-recruiting/
I am a 21 year undergrad majoring in Mechanical Engineering and minor in Mathematics Department. I have received an interview opportunity at a PE firm. I have no prior work experience in Finance sector.
I am excited and at the same scared of this interview as I want to make best out of this opportunity but I don’t know how to show my interest in this field given the fact that I have no experience in this field and other related fields.
How should I go about preparing for my interview?
Learn an industry really well, come in with investment ideas, and be able to explain how you could get up to speed quickly on the technical side and learn enough to contribute to deal sourcing and execution.
Hi, I would like to ask some advice.
I am a consulting engineer, working on due diligence in the Power&Utilities sector. I have just been offered two positions, (1) mid-market investment bank and (2) small private equity firm ($300m of funds) investing in infrastructure (not companies).
At the investment bank I was told that I would have to work a lot on origination.
At private equity firm I was told that my focus would be on financial modelling.
I am unsure which to chose, on the one hand the investment bank is an established company with an history but the idea of working extensively on pitches in power point doesn’t appeal to me. Nevertheless I would do it to get into the industry.
On the other hand the private equity firm does not have a strong name as it has just launched, but the idea of mastering financial modelling seems better than mastering power point.
I would like to gain experience in either of the two and then move to a larger organisation, either IB or PE, in a couple of years. Could you please give me your opinion on which to choose?
I think both works to be honest. I’d say it depends on the team – are they willing to give you responsibilities? What projects will you be staffed on? You may want to raise such questions and try to gauge which opportunity allows you to learn more.
I’m a 20 y/o final year undergraduate student studying Accounting and Finance at a non-target university in the UK. And I’m graduating in June.
I would really love to get into PE in the future and I was wondering if you could give me your thoughts on the plan that I currently have in mind.
As soon as I graduate, I plan to join a TS division of a Big4.
After gaining 3 or 4 years of experience within TS and my Chartered Accountant (CA) qualification, I plan to move to the firm’s valuations division and work towards getting the Accredited Member status from American Society of Appraisers. I expect this will take another 3 years.
Once I have gotten the accreditation, I plan to move into the corporate finance division of the same Big 4 while I pursue my CFA, which will take another 3 years.
Do you think my plan will help me realise my goal of getting into a mid size PE firm in 10 years time?
If you think this is going to do the total opposite, please suggest what I should do once I achieve my CA status. The CA is important due to personal reasons.
P.S: Your site is amazing!!
Yes your plan can potentially help you achieve your goals, especially if you aim to move into corporate finance down the line. The key is to gain relevant deal experience during/after you get that qualification so its easier to transition into PE roles. Most PE firms prefer candidates with IB and deal experience. https://mergersandinquisitions.com/private-equity-recruiting/ should help you.
Hi, I was asking about the PE hierarchy in comparison to IBD’s. Is it easier to move up in PE or IB? Is PE the safer bet compared to IB, when it comes to “up or out” culture; which is the riskier field to advance into?
I’d say PE is probably a bit more fund and individual based – smaller team so your work/efforts can really be noticed. I’d say IB is probably “safer” versus IB. This link here https://mergersandinquisitions.com/private-equity-recruiting/ should answer your questions
Hi, I’m wondering if is easy or not having a job in PE right after the university ? Or you pratically have to get into PE only after a job in another field; thanks :D
Yes, most people get into PE after working in IBD https://mergersandinquisitions.com/private-equity-recruiting/
Hi, I have a serious question about the PE hierarchy, it seems as though that in Private Equity very few ever come to be a Partner anyways. If it is so hard to become a PE partner, why would people leave Investment Banking if there is little internal advancement waiting for them at a major PE firm. I understand that the hours are better and that making MD is very difficult (but not as hard as becoming a PE partner). But my question is why do so many people leave banking for a dead end street with little room for moving up the hierarchy? And also am I correct in stating that it is much harder to move up in PE over i-banking? Wouldn’t the difficulty of advancement in PE make i-banking the higher-paying field in the long run?
Thanks and, FIN-ance or FI-nance? (Haha, I had to ask!)
Samuel, great question. https://mergersandinquisitions.com/investment-banking-exit-opportunities/ should help you. In some cases being on the buy side can give you more autonomy, better hours, and yes better pay if you’re any good at what you do. However, if you’re no good at what you do, chances are you’ll be eliminated even more quickly than in banking because buy side firms are smaller and they are likely to weight more importance on people’s output. So to answer your question, people leave because they think they can do better on the buyside, and there maybe some truth to that. Not necessarily, it depends on the firm and how good you are. Some people thrive in PE others thrive in IB, some thrive in both! https://mergersandinquisitions.com/private-equity-recruiting/ is also a great resource.
Thanks so much for your response and for the entire staff, thanks for keeping up this website. Mergers & Inquisitions is such comprehensive and well-maintained site that it has become an valuable resource in determining what field I hope to pursue, (probably investment banking)! Thanks again for your time.
You’re welcome. Thank you for your kind comment!
Hi, I’ve been offered a role in a large PE Secondaries fund and wanted some opinions on how similar this would be to your standard PE buyout role and if this would provide good opportunities to move into a standard buyout fund at some point in the future? I’m coming from a Corporate Finance role at a big four accounting firm so recognise that any sort of move into PE will be difficult (although I also have an offer at a lower/mid PE house)…
Essentially I’m wondering if I should hold out for the standard buyout role in a large fund, make a move into secondaries at a large fund and then try to move a few years down the line, or move to the small/mid fund (salary and fund size interests me less here) and then move on later.
Sorry that’s a bit long winded!
I am not quite sure why you’d want to hold out for the standard buyout role. I think it can be challenging to move from big 4 to PE, so I’d probably move to the secondaries fund now, unless you don’t like the team and company
I have made a presentation on “Private equity”. What should be my best and precise answer if the Professor asks me about why I have chosen this topic ?
Because you love to do deals and invest in companies from different industries ….
https://mergersandinquisitions.com/private-equity-recruiting/ should also help you
I’m an analyst in corporate banking at a BB. Would I be able to take a modeling course and get into PE since IB modeling is the main difference between Corporate Banking and IB?
Yes our modeling courses can help you with your PE interviews! Our modeling courses focuses on modeling for IB and PE interviews. If you sign up on our mailing list you will have free access to our sample videos.
Thank you. How long should I stay in Corporate Banking before applying to PE? I’m thinking 3 years.
Perhaps 1-2, then target MBA then PE maybe a more straight forward route
You can try applying without the MBA though it can be tough
https://mergersandinquisitions.com/private-equity-recruiting/ is a great article which should give you more insights
of course your not going to be a mega millionaire at age 25. Most people haven’t even got there MBA yet. At the very least you will probably be in your 30s before your making millions.
Thanks for your input!
Are you familiar on what is the best practice to go prepare for FIG related PE interviews? Unable to find anything.
If you can recommend some resources, that would be much appreciated.
This is for Nicole. I’m 29, only have a high school degree and want to break in to PE. I live in Wash, D.C. . I’m wondering if I can go to college at UDC for 2 or 3 semesters and then transfer to Georgetown and if you know what would be the minimum transfer GPA. Concurently I’d want an M & A analyst summer internship and a global capital markets internship. Not sure if I should get an MBA right after or get 2 years of work experiance first. As I have been a waiter for 11 years I don’t think that will be relevent on my resumee. In any case if I work IB first I at least want 4-5 years as a mid to mid-senior role in PE.
My long term plan is to have a diversified holding company. I want to start small subsidaries in systemicly inportant industries, do venture deals with small firms I believe in (i.e. have passion, the right management team, a realistic minimul viable product and a vision for the future), and buy 5%-25% interest in public companies. I also want to do this with my own money. I will not take equity finacing for my holding company but I’m fine with debt/equity or evan IPO financing for my subsidiaries.
Do you think my educational plans, internship plans and work plans will give me the training I want to operate my future company. My major hobbies are reading think tank research, watching global events through the eyes of local gornments, playing the spx cash options market and valuating companies. I also like to run and throw darts, but not at the same time. Do you think I will be looked at differently because of my age and late start? Also would you or do you know anyone that would be willing to menture me in the ins and out of operating a bussiness as I am only knowledgable in the intellectual area of operating a bussiness and have no hands on experiance? I look forward to hearing from you Nicole.
Sincerely B.A. Lindsay
Thanks for your detailed comment. I believe the minimum GPA is to transfer to G’town is 3.5. I’m not sure about transferring from UDC so I’d invite you to check with the Georgetown admissions office. Yes, I think going to Gtown can help you. In terms of your work experience, yes gaining IB experience and then moving to PE can help https://mergersandinquisitions.com/private-equity-recruiting/
In terms of age, yes you will be quite a bit older than others, though you may be able to progress a lot faster if you have the skills and passion. In terms of mentors, I’d leave this to readers who maybe able to help you.
Do you know if George Mason, AU or UVA are target schools, if not do you have a list of targets?
I don’t think they are targets. Targets would be Penn, Stern, Columbia, Harvard, Stanford, Georgetown. UVa can be considered a semi-target
G’town addmissions told me on the phone min transfer GPA is 3.8 She said it didn’t matter where you came from, they are looking at overall history and future plans.
Thanks for letting me know. G’town admissions may have raised their GPA requirement then. Good luck with the transfer!
I’m a young actuary at a top consulting firm. I focus on financing strategies for healthcare startups. I’ve been transitioning my focus more into enterprise risk management with my clients, hence my strong interest in PE. Do you ever see movement from actuarial consulting into PE? Without typical IB experience, is it still a feasible transition? Any help is greatly appreciated. Thanks!
IS LBO modelling experience necessary to get into PE
I don’t think it is necessary per se though it is definitely a plus. It depends on the fund. Not necessary for growth capital/equity
I am privileged enough to have two summer internship offers this year. The first offer is a research analyst position at a larger PE firm. I think they would hand me a sheet with hundreds of company names, and I would have to compile financial data on all of them. Plenty of grunt work.
The second offer is one I got through personal connections. It is for a smaller wealth management firm that does some private investing. At this firm, I would do financial modelling, and the opportunity to give an opinion on investment decisions. The employer has already spoken to me about possibly working there full time in a year, after I graduate.
So, in the interest of building a better future in finance, which would be the best option?
Congratulations! The larger PE firm (Is its name big?) may give you better “credibility” on your resume. However, it sounds like you’ll be learning more from the WM firm. It depends on two things (1) Is the name of the PE firm good enough to open you more doors going forward even though you’ll just be compiling data? (2) Do you want to pursue PE or wealth management?
I wouldn’t count on discussions of full time offers unless they give you a contract at the end of the internship to be honest. And most interns/analysts do grunt work so I would be very surprised if you’ll be doing otherwise. I would place more emphasis on which team you’re interested in working with and finding a mentor/superior who is capable and willing to guide you.
I’m an analyst at an elite boutique and I’m preparing for the upcoming recruiting season. I know you have to be specific with the firms on why you want to work at a mega fund vs why you want to work at a middle market fund. Any advice on how to approach these questions?
Thanks for the help!
Yes the level of exposure and deal size you’re dealing with maybe higher and bigger in a mega fund vs. a middle market fund. The firm focus, training program and structure of the teams will also be different. You can talk about the above. Furthermore, you can list a spark – you met someone from XX bank and he introduced you to the whole team etc etc and you guys had great chemistry https://mergersandinquisitions.com/top-investment-banks/
I have recently received an offer from a BB for an analysis role in their Finance division. I’m also on the brink of receiving an offer from a small PE firm. Any suggestions to help me decide?
My passion of course is for IB/PE, but in my country, working at such a BB is an extremely prestigious matter and just the pedigree name can open doors. So I’m hesitating in turning it down.
The PE firm itself is on the lower end of middle size firms, so my exit opportunities MIGHT get limited.
Comments invited from anyone who has anything CONSTRUCTIVE to suggest. Thanks!
Seems like you’re leaning toward the bulge bracket. If you don’t mind that you’ll be in middle office, I’d do the BB role. If the small PE firm is offering you a role in front office and you want to do PE in the future, I may consider the PE vs the BB role
Thanks Nicole! I appreciate your insight.
I’m yet to receive the offer from the PE so I may end up accepting the BB offer by default.
Whatever happens, I’m gonna drop in a word with you guys at M&I when I decide; ’cause some of the suggestions in here were instrumental in getting those interviews in the first place.
Are most PE firms also partnerships, like consulting firms? Or are they more like some large banks, where you can also make millions but will never actually own the firm you work for?
Yes I believe so. If you start your own firm or gain shares of the company, I believe you might own the firm
Hi Brian & Nicole,
I am currently a rising junior and I have recently completed a summer analyst stint in M&A at a small regional boutique IB. Given this information, I was wondering how plausible it would be for me to complete an off cycle internship at a regional boutique PE/VC shop as opposed to try to shoot for another regional boutique IB stint before the upcoming fall recruiting season. In the short term, I intend to leverage my experiences for a BB IBD internship for my crucial junior summer. However, in the long term, I do intend to eventually move to the buy side. If I choose to take the PE internship route, would it be looked upon negatively during my BB IBD interviews? If it makes any kind of a difference, I already have an offer from the local PE shop. Also, in terms of reputation, they are roughly in the same boat. Thanks!
No, I don’t think IB interviewers will look “down” on your PE internship experience. However, I believe they will be curious as to why you want to work in IB vs. PE. If you don’t have other internships on hand & you want an internship in finance now, I’d suggest you to take this internship
Thanks! What would we a good a way to talk about why I would want to do IB vs PE in an interview? Obviously, interviewers may question my “fit” with many feeling that I may jump to PE way too soon.
Why do you want IB over PE? You want more structured training & environment, you want something faster paced and you want to be exposed to a variety of deals.
Living in CEE country, currently pursuing a long term internship at top-tier IB boutique. Want to land an entry level job at Private Equity. Have to choose between full-time analyst job offer at that boutique or long-term visiting analyst/intern position at top PE house (TOP 15).I will be grateful for any suggestions.
Congratulations! Did you ask the PE house the likelihood of interns staying on as full time analysts? Which team do you like better? The boutique role offers more security though the brand of the top PE house will be a “stamp” on your resume. Why don’t you tell the top PE firm you have a full-time offer at another PE house and ask them if there’s a possibility for them to provide you a full time role instead?
No chance to stay as an analyst at PE house. Only to have a strong brand in CV. Choice between analyst position at Lazard vs. no offer guarantee from PE house. I would probably go for Lazard.
I have a Finance/Economics degree from a small school no one has ever heard of, I work in Fund Admin (for 1yr now) and I live in a zero-finance-activity city in the midwest. My options for IB are extremely limited. I just took the first CFA exam to help stand out more on paper.
I have interviewed with one M&A firm where the MD hinted at hiring me later this year and then offered to introduce me to some PE firms in the area. I mentioned that I thought PE was more of a post-IB job and he said “they like to hire young talent so they can train the way they want and not have any bad habits to break”. Being such small firms (IB and PE) and so few deals, I don’t image large sums of money going to analysts.
If I were to go the PE route, how would that affect my chances of getting into larger IB firms later on? Does anyone go back to IB from PE? Also do MBA programs care one way or another?
Moving back into IB after PE is uncommon and you’ll face quite a lot of questions with a move like that. However, if you were offered a role in a PE firm, I’d still take it and see how it goes. If you work for a well known PE firm, I think top MBA programs will be interested in your background. MBA programs care about the brand names of the firms you work for and most importantly, your performance (based on your recommendation letters) and how well-rounded of a candidate you are. Essays and your GMAT scores matter too
Something’s been haunting me for a while and I decided to ask for help:
My friend and I are starting to search internships in PE. So far, he got past 2/2 group-case studies and is now in the interviews phase – I got rejected in both of them. The thing is: he told me doesn’t know anything about PE, he never went to lectures on the subject, he doesn’t know what he is supposed to do when hired, he even told me that he never liked the investment world – he is trying to get in for the money. On the other side, I always attend to lectures, I read many many books on investing, private equity, etc and I really want to work in this area. I really don’t know what it is that I am doing wrong that he is doing right. Any ideas? (by the way, I asked for feedback and the companies told me I “didn’t fit in the culture”)
Thank you very much
Thanks for your articles, they helped a lot. I am an undergrad and after some networking have secured an interview with a boutique P.E. firm this week-really late in the game I know. The issue was after getting dinged from two superdays and rejecting an offer in October, I just sent out resumes everywhere. I didn’t expect a response but now I don’t know what to do or how to prepare. As an undergrad I have no IB experience let alone P.E. I have a background in finance but not sure they will buy my “why P.E. or why us story”? How can I prepare for this?
Congratulations. I’d read up on all our PE articles on our site
Think through why you really want PE and how your strengths can add value to the firm.
Thanks Nicole and the entire M&I staff for your website. I just called the call back for the job today. I actually had to show up for today to help source a deal.
It should read, “I just got called back for the job today”. Too excited to proofread.
Congrats! I’m glad you like the site. Thanks to Brian!
Why Venture Capital?
How to answer that question? Do I give the same answers as I would for PE? ‘Enjoy working with companies over the long term’ etc.
Anything I should add or not say?
You want to demonstrate your enthusiasm for investing in startups & talk about how you can contribute to the firm you’re interviewing with and how it fits your career goals. The first 3 reasons on this post are more PE related; the 4th reason can be used for VC interviews though you might want to spin it & make it more convincing
Awesome article as always.
On an unrelated note I have a question regarding my situation.
I’m 18 and currently applying for business school.
I got an opportunity to do an internship at a leading PE firm in Europe through a mutaul contact with the head of HR (I have a personnal email address) although I am still required to write a cover letter and send my resume.
Problem is my only “true” professionnal experiences would be internships in high-end hospitality, but even so my contact told me not to mention them as it would come over that finance is just my second option career-wise.
So how do I pull of a decent looking resume and especially how can I give a bit of substance to my cover letter since I can’t speak about my professionnal experiences (or lack thereof) ?
I doubt (read hope)that my cover letter won’t be read as usual so I’d rather not take any risks there.
Any advice is greatly appreciated, thanks a lot for all you guys do.
I don’t think the PE firm will expect you to have a stellar CL since you are only 18. Write what you can. I don’t think listing your internships will hurt you because it is better than having nothing on your resume. And you are only 18, they will understand. Make sure they like you
Appreciate the answer thanks. I’ll do my best and see how it works out.
On another unrelated note I am having second thoughts on my choice of schools:
I have a non-target top 10 european finance university or a hospitality oriented business management school (they still teach market finance, accounting, etc) which is pretty much the equivalent of an Ivy (ranked best worldwide), targeted by BB banks (including some IB jobs) and with a ridiculously amazing alumni network.
Considering that I’m already halfway through the (rigorous) selection process of the second, should I stick with that one or would it be a major handicap compared to the finance university per se if my objective is PE, VC, HF, etc ?
Again, thanks a lot, keep doing what you do.
If both universities are targets, I think what matters is which subject you are more interested in. Of course having a background in finance from the top 10 European finance university will help, esp if your objective in PE VC and HFs. However, the hospitality oriented business m’gmt school can potentially help you with hotel/real estate related financing roles.
I really appreciate the article. Well done!
I would be grateful if you could share your thoughts. I have started working at a top law firm in private equity department. I would like to move, at some point, to PE house and actually work on the deal side.
1)Do you think it is possible to move straight to PE (as opposed to by going to IBD first), especially if I can prove some quantitative abilities by courses/certificates?
2)When do you think would be the best time to make the move? After 2-3 years?
Thank you for your thoughts!
1. Yes. You will have to be very lucky and find the right opportunities and team.
2. I don’t believe there’s a good/bad time – it depends on when the opportunity comes knocking on your door
Thanks for this website. I am working in public finance right now (underwriting muni bonds etc), and am wondering how I should tell my stroy if I want to move into infrastructure PE. Thanks a ton!
Focus on your valuation/modelling experience if you have had any. Find a spark which led you to infrastructure PE. Can’t really help you on the comments page since we haven’t coached you before
Hi Brian and Nicole,
According to Damn It Feels To Be A Banker, once you get into PE, you’re on your way to greatness. Whilst this makes the point very clear that a top PE firm is potentially a good entension of IB life if you can get in, but what’s the career path after you enter the PE industry? Do most people stay on to whichever level they can achieve, jump around different PE firms, invest themselves or retire on their yacht? Is it a relative stable industry in terms of layoffs? What are the exit options if you can’t deliver or if you become really successful is there an industry that beyonds PE?
I know it’s alot of questions, thanks very much in advance!
These articles should answer your questions
I originally thought I wanted to go the trading/hedge funds route but I’m now thinking that I’m more interested in the companies themselves and their operations rather than just their stocks. Is Private Equity the best way to go in that respect or should I choose a different area of finance?
Sure, if you want how to invest in companies and be away from the “public markets” side
Can you explain the difference between a secondary private equity firm, and a direct private equity firm?
Private equity secondary market refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds; secondary firms focus on this secondary market.
Direct PE firm – PE firms that invest in their own investments directly (vs buying other PE firms’ pre-existing commitments to investments they made)
Thanks Nicole! Is there any difference in the work that you do as an entry level PE analyst, between the secondary and direct PE firms?
That I’d leave to readers on the site to respond.
I may be able to shed some light on secondaries vs direct investment, since at my firm we kind of do both:
At a direct PE firm as an Analyst you analyze companies, info memos, prepare presentations, lookuo comps and build valuation/LBO models.
As a secondaries investor on the other hand, you analyze funds – you are essentially a fund investor, buying fund interests from other sellers (could be distressed or not). This means analyzing the team (any turnover, new additions, carry structure etc.), the track record, the current portfolio (which companies are stars, which are going to goto nil etc.) and you make your own judgements on whether the GP’s valuations look reasonable (e.g. if the GP values the company at 20 times EV/EBITDA, I’d revalue using the comps’ median multiples. And then you come up with your own fund NAV (which will be different from GP’s). While putting in a bid you mention at what discount you would like to buy the interest.
Awesome thanks for your insight.
is there an article that breaks down how PE firms’ funds are broken down? EG: I don’t understand how to determine the size of a fund. Say a PE firm raised 12.5b since it’s beginning, does that make it a 12.5b firm? or, do the previous funds it’s raised not count towards it’s total size b/c funds last for a given amt of time.
The size of the fund depends on its performance. http://www.calpers.ca.gov/index.jsp?bc=/investments/assets/equities/aim/private-equity-review/understanding.xml
Gr8 article – ty. I guess more of my qn is – say I pick a PE firm and want to determine what size fund its considered, how do I find that out? Website, anything? And particularly one that’s up to date. Ty
Don’t quite understand what you mean by what size fund its considered? As in how big the PE firm is? The firm’s website should show
ok, i guess the keyword is “committed capital” sorry and ty you’re right, sites do list it.
I was just reading over this article and a few of the links posted. It all was a very big help. Recently, I have been contemplating changing my career path to get into the IB or PE industries. I have been talking to some of the guys in my local alumni club and they have been helpful into introducing me to several area contacts to make this transition. The reason I have been looking into this change is because I have recently come into some money. I am 24 and work at a great company with a lot of room for advancement in the future, but I am not sure if that is really the best career path for me. I don’t just want to sit on this money. I want to make it grow and take on new challenges. I want to start looking into some entrepreneur ideas and take on some larger investment in the 5-10 year future. The job I am at now will not prepare me for anything like this that I now have aspirations towards. The hardest thing for young entrepreneurs starting out is obtaining capital. I already have that, now I just need the experience necessary to do something productive with my money. I do have a degree from the University of Illinois in Consumer Economics and have taken numerous finance classes, but these are just classes and not real world experience. I am looking for what to do next to obtain this experience. Is working at a PE firm a good way to learn about industries or taking on entrepreneur investments? If I work there for a few years, would I be ready to start taking on my own investment ideas and would working there give me some more ideas as to what industries to invest in? I am basically looking for some advice. What would best prepare me for entrepreneur endeavors in my 5-10 year future? Thanks in advance.
Yes, PE/VC firms are good avenues for you to learn about industries. Yes, and having a network of VC/PE guys would help. And don’t wait for 5-10 years, start it now.
So I’m about a year in at an economic consulting firm, think cornerstone, charles river, nera, etc. I started right out of college. The base salary is good but the bonuses aren’t.
I’m looking to move to PE, and I’m wondering what’s the best way to go about it.
1) Leave to get an MBA in about 2 years time (company places very well) and try to switch/rebrand
2) Try and lateral now using networking/headhunters
How transferable are the skills learned in economic consulting to PE? Do I have a shot at all, since I have no PE experience? Are certain types of PE easier to get into for someone with my background?
In your case I believe an MBA might help you though you shd consider the time & cost for the degree. You should also try to cold-call & network w PE principals yourself in the meantime to see what’s out there. Most of the PE guys look for people w IB experience (modelling i.e. LBO models), not sure how relevant economic consulting is to PE firms. Can’t name a PE firm that is easier for someone w an econ background to break in. However, I’d focus on boutique firms cause its harder to break into big brand name PE houses. https://mergersandinquisitions.com/how-to-get-into-private-equity/ helps
I have never heard Brian mention Private Equity within bulge brackets in his articles yet. How do they stack up against an i-banking internship and are they the same as perhaps KKR? For example, is there a huge difference between private equity Goldman Sachs and KKR? Also, they seem to recruit summer analysts so it seems very interesting and strange to me.
They are definitely lower on the prestige scale than dedicated PE firms like KKR. There is a big difference and they almost always work on much smaller deals because PE internally at banks is not a priority to them.
What about switching to PE in KKR from Goldman PE? Impossible?
Yes it is possible – similar experience and skills required for both. You need to know the right connections and land yourself an interview.
How hard is it to get a PE job within Goldman compared to an i banking internship within goldman as well?
If you are comparing a full time PE role at GS vs an internship at GS, I’d say the former is tougher to obtain.
Is the financial sponors group generally a big target for headhunters, seeing as it closely relates to LBO’s?
For headhunters looking to recruit for PE firms, yes they are interested in people who have worked in FS groups. I wouldn’t say big target but they’re interested
I’ve always heard exits from a BB FSG group are as good, if not better than from M&A/levfin due to their close working relationship with sponsors and the relevancy of their deals.
What’s your take on this?
Yep I agree.
I am currently working at HSBC out in Chicago in their financial graduate development program. It is mainly coporate side and while it is a “financial” program it is mainly accounting. I am coming up on my final rotation and have the opportunity to head to New York to work with our Global Bank and Markets area with either our PE team or in Sales. My question is which will actually help me get out of the corporate bullshit and get into real banking? Will the experience actually help me coming off program get into legit firm?
Probably the PE team is the best bet and yes it will help.
I am in school and wanna start my independent equity research business for buy side firms. Could you give me some idea as to how and what should I charge to these firms. I have absolutely no idea regards to this.
Sorry but no clue there as I don’t firsthand experience, maybe try asking people in ER
i am not so sure abt this, most PE’s in India (these days they go under hedge funds) take non-bankers. equity researchers are ths closest they get, else it is either directly from the iim’s or iit’s. these people also show preference to consultants from the top-3 strategy outfits, its very rare that a banker gets in.
In the vein of Leveraged Sell-out (and to be taken as seriously):
As always, great job with the site, Brian.
Interesting but not nearly as funny as the LSO video… nice effort though.
I had a similar question, also as an undergrad: paid internship in boutique PE or paid internship in boutique IB? I’m not 100% sure I want to do PE immediately after graduation, but possibly in the future. Also, is it rare for PE boutiques to make full-time offers after summer internships?
Do IB then if you’re not certain. Not sure about FT offers from PE boutiques.
As an undergraduate junior: unpaid internship in boutique PE (NYC) or paid internship in boutique IB (Houston)? I’m hoping to do IB after graduation but PE is definitely also an option in the future.
Tough call there but I would probably go with the boutique IB.
I met some PE & HF managers here in Asia, and surprisingly a large number of them came from Research background rather than investment banking. Has this something to do with the region, or is it similar in the US? Also, would you recommend going into Research to land in PE/HF in the long-run?
Not sure about that one, HF is more common from research in the US though. I would not recommend it for PE only for HF
my senior colleagues doubt the banker’s ability to form opinions. the model is to outsource low-value high bandwidth work to bankers. network is not a problem with PEs, so bankers dont get any additional consideration :)
Is an answer like “I want to open my own PE firm someday.” a good one while answering the “Why PE” question?
I wouldn’t quite frame it like that… say you want to be an investor in the long-term, saying you want to open your own PE firm may be a little too much to say in an interview.
But what do i answer if they ask me to clarify “be an investor in the long term”?
Say that you’re interested in investing in a certain type of company, a certain type of deal, and so on.
Hey Brian! Great article as always. I had a quick question about how to best position myself for junior recruiting. I’m a sophomore and unfortunately wasn’t able to land a position at any of the bulge brackets. What should I be aiming for in my sophomore summer? Also, when do boutiques typically start recruiting for the summer? Can sophomores get these positions? Thanks!
Try for rotational internships, or if those aren’t an option, cold-call local boutiques, asset management firms, and so on… if you’re persistent enough you can get them, might have to be unpaid though. Boutiques recruit randomly so there isn’t as much of a set schedule.
So, do PE firms, or other BB firms care if your MBA is full time or part time? I plan on going to Michigan to get my MBA part time, while working full time on the retail side of a BB firm, then transitioning after I get my MBA.
Really depends on the program if you search for “part-time MBA” here you’ll see different reports depending on the school. Need to check with students there because it varies by the school and year.
I have a question about a possible switch to PE. I am currently a first year analyst in ECM at a bulge bracket bank. I know that levfin/ industry / M&A are the best places to jump to PE, however ECM at the time was the best option available to me (where best for me = closest to banking type work)
I have an engineering degree in manufacturing / industrial engineering and am interested in delving more deeply into companies’ financial and operating performance. While I really like ECM, things are much more short term and transaction oriented in ECM.
My question is: How should I maneuver myself to PE? One option that I know is open to me already is to move to M&A/industry coverage / leveraged finance at my bank, however I will be unable to do this until my third year, which I have heard through the vine can make it more challenging to get interviews/ headhunter looks for PE.
Really appreciate everything you do here!
Maybe move to a different bank or an M&A-focused boutique and go for a lateral position… probably easier than waiting around for another 2 years at your current bank
A provocative iinhsgt! Just what we need!
Why does one conduct due diligence if all you need to model a company is its financials? Is it to understand what is driving those numbers?
What tools do analysts use to conduct dd?
Yes you need to understand what is driving all the numbers and whether or not the company’s operations really support what they’re predicting. Normally you look at the documents yourself, go to consultants, lawyers, etc. and get their opinions as well.
Unbranded MBA. Recently switched into boutique IBank. http://www.worbus.com Work as an analyst (models, IMs & other pitch books) on advisory & syndication services on alternative investment deals. What are chances to break into PE firm (from advisory to management)? I am not crazy about deal size or prestige of firms, but interested in regional PE as well.
Probably need to move to a bigger firm or be extremely aggressive networking
Thanks, that was helpful. However i have few more queries:
1) How feasible will it be to move up from a local/regional boutique to a bigger bank or bulge bracket? I need to get into banks like GS, JPMC, or at least Lazard, Evercore.
2) Is there any specific age limit on breaking into PE from bank? Of course it makes sense to do it ASAP. But Do they take banking associates as associates in PE or lower the role to an analyst again?
1) You can do it but it will take time… not going to happen overnight.
2) You would still be an associate, don’t think there is an age limit
How about the opposite? Is it difficult to move from PE to IB?
Yes, because it’s like getting demoted… need a really good story
Great article. Do you think I’d be able to break into PE or some type of M&A entry level position with an accounting undergraduate degree and an MBA in Finance? Will be 24 when I’m finished with both.
Nope, you need previous work experience.
What type of work experience? Some analyst position?
Anything is fine, obviously the closer to banking or PE the better.
Since we’re on the topic of exit ops, do you think you could write an article on sovereign wealth funds (i.e. Abu Dhabi Investment Authority) as an exit opportunity?
There is some discussion of them in the Dubai and Saudi Arabia articles… will see if we can do more
How often do F100 companies care about major GPA? I applied to a few corporate finance internships through OCR but I realize now that my major GPA is below their major GPA requirement while my cumulative GPA meets the cumulative requirement. I was able to apply to the internship postings online because my cumulative GPA meets the coded prerequisites; however, it also states that major GPA must be a certain number and I am below that number. Now that I have an interview coming up with one of these companies, I am thinking about canceling because I do not meet their major GPA requirement and they do ask interviewees to provide a transcript. Our school is very strict on not rounding your GPA. Please let me know what do you think I should do? While I do have legitimate reasons as to why my major GPA is low, I am thinking about just canceling the interview all together because I don’t want to get suspended from the OCR portal. I am looking to break into investment banking but all the OCR recruiting is done and I am left to find related corporate finance positions, like the one I may be interviewing for.
I don’t think they care that much, why would you cancel an interview you have lined up? That makes no sense, go in and pitch yourself as best as possible.
Thank you for your valuable post.
I have a bit of background in Investment Banking but given the crisis period found it rather difficult to secure a job offer at the end. Anyhow, currently I am working in PwC Transaction Services. I was hoping you can shed some light on a move from Transaction Services to Private Equity. Is that realistic?
That’s difficult – easier to move into IB first, then PE. https://mergersandinquisitions.com/breaking-into-investment-banking-accountant/
So if PE is still what one truly wants to do, what skills and types of deals should he be focusing on. Do PE companies like to see a specific kind of deal experience…Is M&A still the preferred group for jumping to PE. Also, does being at a mid market company greatly hinder opportunities to break into PE and if one is still in his first year as an analyst is there any value in trying to move to a BB or elite boutique to have a better shot at tope PE firms?
M&A or LevFin are still preferred… you can still get in from a MM bank. BB or elite boutique is more helpful if you’re dead-set on the biggest PE firms in the world.
Great article. In fact your entire website is really helpful and educational. Although I’m a soph, have no previous finance experience, and am not an accounting/econ/etc. major I’ll be doing IBD SA at GS this summer, and I actually owe a lot to your advice! Right now I’m vaguely interested in PE, but the more immediate concern is GS’ conversion rate, which is apparently really low, right? Do you have any info on what soph SA-junior SA conversion may be?
No idea, sorry.
Given that almost everything on IB/PE/VC has been extensively covered ,i was hoping if you could also touch upon Corporate Banking. I have seen that in lots of banks they club it with IB and it is called the Corporate and Investment Banking group.
Thanks for the suggestion – will see what we can do but need willing volunteers first
This is a great article uncovering the myths behind PE. Good job!