This is my cornerstone article of my series on how to get into private equity
Breaking into Private Equity
I’ll be upfront with you: getting into private equity isn’t easy.
Not only do private equity firms have extremely particular job requirements, they also offer relatively few roles.
To get into a private equity firm, you not only need the “right” background and education, you also have to be a solid fit with the existing team, and be ready to ace the private equity interviews.
I know this from experience — both as an investor myself at a growth-focused private equity firm, General Atlantic, and as a coach to countless students who have successfully landed positions in a wide range of growth and private equity positions.
This article is a full guide that addresses how to get into private equity and what you can expect during the process.
Is It Hard to Get Into Private Equity?
Private equity is one of the most competitive jobs to get – period. Not just in finance, but across the board. Private equity firms have very specific requirements for their hire candidates, both for entry-level analyst positions and for higher-level job openings.
That said, I’ve worked with several candidates who have untraditional backgrounds and – with a lot of work and dedication – have made the jump into private equity successfully.
Why Private Equity?
So why is private equity so attractive to so many?
While no job is perfect, it’s true that private equity investing is one of the most attractive (and lucrative) career paths around.
Private equity is attractive for a number of reasons:
- High prestige and compensation in private equity
- Relatively better than investment banking hours
- Be a decision maker vs. an “advisor”
- Learn more about investing and finance
- Go deeper on an industry focus area (e.g. technology private equity)
- Lots of on-the-job responsibility
- Operational or management experience
- Great exit opportunities after private equity
Recruiters and interviewers will often ask the “why private equity?” question in interviews. While all the reasons above are completely valid, some are definitely inappropriate to state in an interview.
I’ve written a separate article about how to answer this question in an interview. It’s not a make-or-break question, but it can be a revealing one. Make your answer a good one.
Private Equity Career Path
So let’s say you make it into private equity. What does the career path look like in private equity?
Not only is the pay excellent, but you also get a wide variety of deals and industries. If you decide to stay with private equity, the career path usually looks like this:
- Analyst (entry-level) – As an analyst, you are most likely “sourcing” for the firm. Analysts cold-call prospects, research investment leads, and find new companies to invest in. You’re not going to be heading up deals yet, but you’ll be learning the ropes.
- Associate – As an associate, you can move on from pure sourcing to more analytical work. Financial modeling, due diligence research, and LBO models are all associate-level work.
- Senior Associate – You may reach senior associate after 3-5 years at a private equity firm. Senior associates are more involved in the full lifecycle of executing and supporting deals. At this level, the time and financial benefits of private equity vs. investment banking start to become more pronounced.
- Vice President / Director / Partner: At the higher levels of private equity, you are responsible for setting overall strategy, as well as approving/winning individual deals. These positions are obviously the hardest to get and are only available for those who make an entire career out of private equity instead of using it as a launchpad to other opportunities.
Go here for an in-depth look at private equity career paths, including experience level and requirements for each role.
Private Equity Hours
Private equity work is demanding at every level, but especially in junior roles (analyst and associate).
On average, most private equity associates work 60-70 hours per week, though this can very significantly based on whether or not you have a live deal in the works.
I can still remember my transition from investment banking to private equity. There was some relief, in that I was working fewer overall hours and I had more control over my schedule (as compared to investment banking).
However, my days were far more stressful and cognitively demanding in private equity than they were in investment banking.
Read here for more about the work-life balance and hours in private equity.
Getting into Private Equity
Alright, so we’ve covered why private equity is so attractive. And we’ve also established that it’s very, very competitive – but not impossible – to get into the industry.
… but how does one actually get into private equity?
Well, the answer, like all age-old wisdom, is that it depends.
Your individual path into private equity will depend on a number of factors but mostly what stage you’re in in your career right now.
Since the experience and qualifications are so important, you need to map out your path to private equity investing, preferably a few years in advance.
There are a couple main entry points into private equity, and I’ll go through the ideal qualifications or experience you need to break into PE at each point.
Entry Point: Analyst Role (Pre-MBA)
Getting hired as an analyst usually requires that you attend a top undergraduate program, get high grades (ideally cum laude or higher), get great leadership experience (e.g. finance club leader or varsity captain), and get whatever finance experience you can in internships. If your school has a startup business accelerator, a student investment portfolio fund to manage, or good connections for finance internships, take the opportunity.
Since analyst work is mostly sourcing, the ideal candidate has some finance and sales experience, either from an internship or a sales job while in school. Get the best internship opportunities you can, and as early as you can in your undergrad career. A great way to get a full-time analyst role is by landing a junior year internship role.
Entry Point: Associate Role (Pre-MBA)
While analyst roles are getting more popular in recent years, the associate level is where most people start their PE career.
Instead of jumping straight into PE from college, they go through a few years of investment banking or management consulting first, then switch into PE.
The advantage of this is that investment banking firms are larger, and the very nature of a larger firm is that there are more jobs available. You then get the double advantage of finding a job right out of school that’s somewhat easier to get into (though still challenging), while getting some ideal job experience that will serve you well in PE.
You still need a strong undergrad background to follow this path, but if you went to a non-Ivy League school, the school won’t be quite as important on your resume as if you are a “top bucket” analyst at a top investment bank or management consulting firm.
Entry Point: Mid-Career or Post-MBA Roles
This is a rarer path into PE than the entry-level positions, but it can still be done.
It’s much easier to recruit from an MBA program if you’ve already done buyside investing of some kind before MBA (e.g. private equity, hedge fund, venture capital).
However, if you haven’t done investing before, it’s still possible, but you’ve definitely got your work cut out for you.
In these situations, I tell mid-career candidates that the key is:
- Go to a top 10 business school
- The quality or applicability of your background – even if it isn’t investing, is it highly relevant (e.g. investment banking) or valuable to the firm (e.g. a sector of focus); ideally all your experience is in some way leading up to private equity
- Targeting the right kind of firm who is open to someone with your background (i.e. typically a small, mid-market private equity firm that is relatively new and open to interns)
- Consider being flexible on the level of role you apply for (e.g. associate or senior associate)
- Getting LOTS of experience through MBA summer and in-semester internships
- Stay focused, and don’t hedge by looking at 5 other career options during MBA; put all your focus into private equity investing career search
- Network incredibly well
Entry Point: Operations / Consultant Role
There are many ways to work in a private equity firm.
Most folks think only about investing roles – which makes sense why – but not enough remember that operations or internal consulting roles can also be rewarding.
In an operations role you would assist with due diligence, help define strategy for existing portfolio companies, and generally smoothing the way for the people actually doing the investing.
Some companies outsource this sort of work to investment or entrepreneurial consulting firms, but others have an internal role.
The obvious (and best) way into these roles is to have relevant experience. Examples include:
- Management consultant focused on private equity diligence
- Management consultant focused on X industry
- Company operator with growth, marketing, or go-to-market experience
- Etc, etc
This path leads in the door of a PE firm, but it usually doesn’t mean that you get to climb the ladder. It can still be a valuable career move, but won’t usually have the same upward mobility as other PE entry points.
At Any Level: Nail the Interview
In all of these paths, having amazing credentials and doing lots of networking is key. However, you’ll also need to crush your interviews. Great interview skills and successful private equity case studies are critical.
I’ll discuss more later about how to prepare for private equity interviews.
Consulting to Private Equity
While investment banking is by far the most common training ground for private equity, it is also possible to recruit for private equity roles after doing entry-level consulting, especially if you are a top performer at a top management consulting firm.
Some firms will prefer only investment bankers; however, many are open to candidates with consulting backgrounds because they acknowledge that many top undergrads go into consulting after graduation.
It is much more challenging to jump from consulting into private equity investing after the associate level; however, as I discuss in the next section, it’s not impossible.
Go here for more on the jump from consulting to private equity roles.
How Can I Get Into Private equity With No Experience?
I get asked this a lot.
There are precisely two paths into private equity available those with no finance experience:
- 1) aim for an analyst position (if you’re still in undergrad)
- 2) lots and lots of work (if you’re mid-career already)
I already discussed the analyst path above, so let’s tackle the mid-career, career switcher path here in more detail.
Many people say if you’ve never done finance, and you’re 5-6 years into your career already, it’s not possible to get into private equity.
I’m a contrarian. I think you can still pivot your career to get a private equity job at this point.
It’s extremely uncommon, and it requires so much work and personal sacrifice that most people are unwilling to do it.
But it is possible.
How do I know? I’ve seen it done – consider the experience of one of my coaching clients. Preserving anonymity, I’ll share her rough background so you get the picture:
This client went to a strong but non-target undergrad school. She started her career in the hard sciences; we’re talking lab coats and beakers. Very impressive stuff, but very unrelated to finance.
But at some point, she got the urge to get into finance, so she got her MBA.
She applied and got into a top 10 MBA school.
From there, she recruited successfully for a post-MBA associate role at a top investment banking role.
Then, after ~4 years as an investment banking associate, she did something WILD …
She decided to recruit for PRIVATE EQUITY.
On its face, this isn’t all that uncommon. Many banking associates seek private equity roles. However, instead of taking the usual route (targeting smaller, mid-market private equity firms), she decided she was only interested in going to TOP MEGA FUNDS.
She cared so much about the mega fund, that she was willing to recruit for a PRE-MBA ASSOCIATE role at a mega fund, despite being ~4 years post-MBA already.
And, that’s what she did … she studied hard and nailed her interviews. Eventually, she landed a role at an A+ fund as an associate.
This required TONS OF SACRIFICE.
Think about what she did:
- She completely pivoted her career from science.
- She went through the MBA application process, and ultimately paid 2-years of hefty tuition.
- She recruited successfully for a top investment bank.
- She did her time as an investment banking associate.
- And then, FINALLY, she crushed her private equity interviews, which required tons of work, and then took an associate job where her peers were 5-7 years her junior.
Depending on your circumstances, you may not require such drastic moves.
But all this work and sacrifice shows why it is exceedingly rare for folks to break into top private equity firms unless you are already on the “usual” path (e.g. investment banking, management consulting, etc.).
What Does a Good Private Equity Resume Look Like?
As you can tell from above, stellar resumes and qualifications are critical to getting into private equity. Let’s take a look at what that looks like.
Obviously, different entry points into private equity will have different amounts of experience, but here’s what you should be shooting for.
- Top undergraduate school with stellar grades (3.7 GPA or higher).
- If you’re still in school, you can highlight key finance courses you take. If you include your transcript with job applications, it should show relevant, challenging work instead of throwaway easy-A courses.
- You should have relevant extracurricular activities on your resume. Be involved in whatever your school has for finance or business clubs.
- Other extracurriculars that show relevant characteristics. Leadership, entrepreneurship, and sales experience all look good.
- Strong summer internship experience in finance or investment banking.
- Entrepreneurship or sales experience, preferably that involves cold calling
- If you have any wish to work for a global investment firm, conversational or fluent experience with second or third languages is a big plus
- All of the above, plus:
- Two or three years’ experience as an investment banking analyst or management consultant at a top firm; either an elite boutique investment bank or a bulge bracket firm
- 2-3 deals highlighted on your resume that you worked on and can discuss as if they were M&A (or sponsor) deals, even if they weren’t
Post-MBA senior hires
- Older, pre-MBA work experience and undergraduate experience are still important, but the newest school and work experience are the most important on the resume.
- A top business school for your MBA program.
- Investing experience, ideally in private equity, before business school; though as I discussed above, there are ways into private equity without this
Private Equity Recruiting Process
Getting familiar with the private equity recruiting process is key to getting in.
Recruiting from Schools
If you’re a student (MBA or undergrad), most recruiting will occur on a predictable timeline.
That is, most full-time analyst and post-MBA roles are filled during the fall of your last year of schooling (e.g. senior year if undergrad, or second year of MBA). However, many firms will also recruit later in the year, closer to graduation.
Also, keep in mind, most full-time roles are filled by interns who’ve impressed the firm the prior summer.
Therefore, it’s important to keep internship recruiting timelines in mind as well. Recruiting for these typically occurs in Sophomore year for undergrads (in advance of junior year internship) and in first year of MBA program.
For pre-MBA associate roles, most large firms in the US engage in what’s called the “on cycle” recruiting process.
What this means is each year, all the top private equity firms start a frenzied recruiting process lasting 2-3 weeks where they attempt to fill their pre-MBA associate class for the following year.
Once one firm starts recruiting, it sets off a recruiting frenzy across the rest of the firms as they scramble for the top talent. Some firms even finish their recruiting and hiring process for the year in a matter of 2-3 days during this period.
On-cycle recruiting generally starts earlier and earlier each year, with each firm trying to maneuver ahead of the others to get the top talent. This hiring typically targets first-year investment bankers, and to a lesser degree, management consultants.
Generally, to be considered, you will apply or be approached by a headhunter before on-cycle recruiting starts, and have an initial screening interview. Then, once on-cycle recruiting starts, you will have a few days of intense interviews, case studies, and discussions before the firms make their final decisions.
Most smaller US firms (and most European and Asian firms in general), don’t participate in the on-cycle recruiting madness.
Instead, they hire throughout the year as need arises. This means two things. First, it’s extra important to create a professional public presence for yourself so recruiters can find you. Second, it gives you more leeway to do your own outreach to PE firms.
If you are hired through off-cycle recruiting, the recruit-to-hire process won’t be as condensed as on-cycle hiring. It will most likely take longer than three days from outreach to hire, but you still shouldn’t expect it to take very long. If you get an offer or are contacted by a headhunter, jump at the chance.
Private Equity Headhunters
Private equity headhunters (commonly known as “recruiters”) are a key part of the private equity recruiting process.
Not all private equity firms use recruiters, but many (most) do.
When recruiters are involved, the recruiter firm will typically handle initial search and screening interviews of all candidates. Think of them as the gatekeepers to the private equity job you want.
Impress the recruiter, and you will move on to interviews with the firm itself. Miss that first impression, and the recruiter will move on to someone else.
The headhunter will reach out to you, usually through either email or Linkedin, to set up an initial interview. If you don’t receive a message from them, but you want to get on their radar, you can use these same channels.
Search them on LinkedIn, and leverage mutual connections to send them a message. The best introductions are from co-workers who’ve worked with the recruiter in the past (all the better if they’ve successfully gotten a private equity job).
Recruiter firms for private equity are always changing, but you may see the following names:
- Amity Search Partners
- Henkel Search Partners
- SG Partners
- Ratio Advisors
For more, check out my dedicated guide to private equity headhunters here.
Private Equity Interview Questions
Let’s say you have a great resume with the right professional background.
This gets you in the recruiter’s office door.
Now, the interview process determines if you get further than that!
Private equity interviews are more than just one, or two, interviews. After your initial screening interview with the recruiter, you will move on to a series of several interviews with different members of the private equity firm.
If this is during on-cycle recruiting, it will be very intense. You may have several interviews with different people during the same day.
However, regardless of on-cycle vs. off-cycle, you will still be asked a mix of questions to determine your suitability for not only private equity as a job, but also the firm itself:
- Fit questions: A few of the big ones here are “why private equity” and “why our firm”. You may also be asked why a specific investing niche or industry group like tech. If the firm’s PE has a specific focus like socially responsible investing or ESG, you will have to ensure that you have a story to “fit” well with their company values.
- Behavioral questions: These are the questions like: “Are you a self-starter? How do you handle mistakes? What would you do if…” The interviewers want to see that you can think on your feet, handle feedback well, and have strong interpersonal skills.
- Technical investing questions: Interviewers usually assess these skills through a series of case studies and a paper LBO. These are either completed during an interview itself, or are given to you to prepare beforehand and are dissected during the interview.
For more, check out my article with the top private equity interview questions and potential answers.
Private Equity Case Study
Most private equity associate-level roles require you complete one or more case studies as part of the interview process.
The case study is typically structured as a potential investment (either real or imaginary company) that you have to assess.
Different firms make it more or less complex, but essentially the basic case study looks like this:
You are given materials on a potential investment. This info could include prior investment committee memos, public company filings, or confidential information memoranda.
You are then asked to go through the information and answer the question: given certain assumptions (e.g. valuation parameters), would you invest in this deal or not?
Typically, the private equity case study will require you to create a leveraged buyout model to support your investment recommendation, which would either be a written memo or powerpoint presentation.
Such a case study could be given as a “live test” and you’ll be expected to complete it within 2-4 hours (common for on-cycle recruiting) or as a “take home assignment” where you’ll have 2-7 days to complete it, followed by a discussion or presentation.
Leveraged Buyout (LBO) Model
An LBO model is the standard financial model used in private equity to estimate the returns of an prospective investment.
An LBO model will include a 3-statement model (balance sheet, income statement, statement of cash flows), as well as a detailed pro forma balance sheet and debt schedule for the prospective investment. It usually assumes a 5-year hold period.
To be successful in private equity recruiting, you’ll be expected to know it very well, especially if you are interviewing for roles at the associate level or above.
If you haven’t done investment banking before (e.g. undergrads or consulting hires), some firms will give you an allowance and have lower expectations for your knowledge of LBOs.
However, given how competitive recruiting for private equity roles can be (and given the fact that LBO models are learn-able), I recommend that such candidates prepare ahead of time and use it to their advantage that, despite lack of formal experience, they’ve taught themselves how to do an LBO model.
Paper LBO Model
If you are interviewing at an associate level or higher, you are likely to get a complex case study (discussed above), but you will also encounter something called a “paper LBO”.
A paper LBO model is a highly simplified LBO model that can be completed with pencil and paper, usually in a maximum of 20 minutes. Some paper LBO exercises may even be purely verbal with your interviewer.
A paper LBO has simplified financial statements, usually an income statement, cash flow statement, and a list of assumptions to simplify calculations.
If you’re wondering why a firm would torture you with pen-and-paper calculations and mental math in our digital age, it’s because the paper LBO is a great way to quickly assess whether someone truly understands the dynamics underlying LBO models. They can also be great ways to test someone’s knowledge of the deals listed on their resume. For this reason, I typically recommend candidates be able to do a paper LBO from memory for each deal listed on their resume.
For more information, go here for my guide on preparing for the paper LBO exercise.