This article is part of my series on how to get into private equity
If you are getting ready to break into the world of private equity, your future employers want to know that you are getting into it for the right reasons.
While most interviewees probably spend more time panicking over financial analysis calculations than thinking about their motivations for entering private equity investing, the one simple question can be enough to make or break your chances for getting the position you want.
“Why private equity?”
In this guide, I’ll detail reasons to be excited about joining private equity, and I’ll discuss how you can answer this important interview question.
Why do interviewers ask “Why private equity”?
By asking “why private equity,” your interviewer is primarily trying to learn about who you are and what your goal may be.
Of course, there’s other benefits to asking this question – you also observe lots about a candidate’s situational awareness and “finesse.”
For instance: sure, you may be interested in private equity for your chance at making lots of money, but saying this outloud in the interview would be a major faux paw. It’s probably the quickest way to show your interviewer that you not only don’t really care about the work intrinsically, but also you don’t have a sense of appropriateness and how to communicate about delicate topics.
Your answer also tells a lot about how well much you researched the opportunity, and whether you know what you’re getting yourself into.
Interviewers want to understand your motivations, they want to assess your ability to communicate, and they want to be sure you’ve done your homework about what it is you’re getting into.
Do your research to ensure you know what a career in private equity is realistically like.
How Important is “Why Private Equity”?
While every question is important in an interview, just remember: this question isn’t going to “get you the job.”
It’s usually a “check the box” type of question, where the interviewer asks to get to know you better, but it typically won’t help you standout from the pack (in a good way).
We’ll discuss more below, but typically there’s only “downside” in this question, since there are some definite ways you should AVOID answering this question.
How to answer “why do you want to work in private equity”?
So you’re facing the question: “why private equity?” How might you answer?
Well, every candidate will need to answer in a way that’s authentic to them and their background. However, below I’ll offer some themes that might resonate well.
These include (but are not limited to) the following:
- Be an investor vs. an advisor
- Go deeper on finance
- Go deeper on a sector
- Chance to learn more quickly
- Get operational experience
Below I go into more detail on each of these.
Be an investor vs. an advisor
If you’re coming to private equity from consulting or investment banking (as most people are), it may be true that you are attracted to the industry because you get to be an INVESTOR (or principal) rather than an ADVISOR.
After advising lots of clients or on lots of transactions (as you do in consulting or investment banking), many find it appealing to be in the driver seat actually pulling the trigger on deals. In any investing role, you’ll have the chance to make decisions and drive the process.
Learn more about investing or finance
If you’re passionate about investing, private equity can offer a great chance to go much deeper.
This answer particularly works best if you can point to ways you’ve been an investor in the past – for instance, through school clubs or personal interest.
While investment banking or consulting may have helped teach you the base finance skills, you can voice that you’re excited to go even deeper and learn finance/investing from a different perspective.
Go deeper on an industry of focus
If you have a passion for a certain industry that a private equity fund invests in, this can be a powerful reason for why you’d like to join.
This answer is particularly powerful if you’ve had prior experience that focused on a particular sector (e.g. you did investment banking in a coverage group for technology and now you’re looking at technology-focused private equity firms).
Lots of responsibility + lots of learning
This is a little generic, but one appealing aspect of private equity investing in general is that you get to learn about a lot of different things at a very rapid pace.
Every week or month you’ll be getting up to speed on a new industry or company. Especially if you’re a fast-paced learner, this can be very appealing to weave into your story because it shows that you’ve got a feel for what the job entails.
You could also mention that in private equity you know you’ll get even more deal responsibility, which you’re really excited about, because that’s where you thrived and learned most in your last job, etc.
In private equity, most funds target controlling stakes in their investments.
By definition, this means that the firm has control over the company’s operations. There are different ways that firms exercise this control (e.g. by appointing management teams, by appointing board members, or by getting involved in the actual day-to-day).
You’ll want to research where the firm is on this spectrum of “getting involved” but it’s a very valid answer to say that you’re interested in private equity because you’d like to get more exposure to operations and management of actual businesses.
How to supercharge your answer
You can probably tell from the discussion above, but one way to make your answer much more compelling is by connecting the reasons you give for your interest in private equity to your prior experiences and passions.
You might say you want get into private equity because you’re interested in investing and going deeper into finance.
But the answer would be much better if you could mention that you want to learn more about investing because you’ve loved it since college when you part of your school’s investment club. Also, in your banking role, you noticed your favorite deals to work on were buyouts because you loved working on LBO models, and that’s why you’re excited to go even deeper in private equity.
One other way to improve your answer is to keep it concise!
Prepare your talking points based on your strengths and interests, but your entire answer to this question should probably be 30 seconds to 1 minute.
If you have a really good story, you can tease the story in your answer and the interviewer will ask more questions if she wants to or has time.
Follow Up Questions
Since the logical corollary to the question, “why private equity?” is “why not anything else?”, you may receive questions about why you don’t want to go into other areas, or why you’re ready to leave where you are.
Keep your answers positive and forward-looking. You don’t want to give the impression that you’re running away from a bad opportunity, only that you’re running toward a great one.
If your answers to the “why private equity?” question could be interpreted to apply to other specialties as well, such as hedge funds or venture capital, be prepared to give a quick compare/contrast answer to show why you’re choosing private equity over other options.
What Not To Say
There are several answers you want to avoid with this question. They are sure-fire ways to NOT do well in your interview.
Avoid these answers:
- I’m motivated by money
- I’m motivated by prestige
- I hated my old job
- I want better work-life balance
- I want a stepping stone to the next thing (e.g. MBA)
Even if there’s some truth to them, put your best foot forward by showing that you know to avoid these answers.