Private Equity is a type of investment that involves equity firms pooling together funds from various sources such as pension funds, institutional investors, high-net-worth individuals, and other sources to invest in private companies. Private equity funds are typically managed by private equity firms that raise capital from limited partners and invest in a variety of opportunities, including buyouts, growth capital, mezzanine financing, and distressed investments. If you are interested in joining the private equity industry and success Private Equity interview, there are several ways to get involved.
Few professions arouse as much interest from students in Grandes Écoles as Private Equity. Indeed, beyond the prestige and levels of remuneration, Private Equity is a fascinating profession thanks to the financial, entrepreneurial, and strategic expertise it requires. However, investment fund teams are often very small, so there are few job offers. This gap between the supply and demand of young graduates for this profession makes recruitment extremely selective. Anne-Sophie, a headhunter for Private Equity funds at AE SEARCH, shares all the secrets to succeed in your interviews today. You will discover how many rounds a process in Private Equity contains, what they consist of, and how to best prepare to land an offer.
How many interviews in a Private Equity process ?
Before applying to a Private Equity fund, you should be sure to be well prepared, because once a process is launched, the first step can come very quickly. For an internship in Mid or Large Cap, there are generally 2 to 3 rounds of interviews. The goal is to meet as many collaborators as possible.
In a classic process, a student is likely to meet 2 Associates during the first round of interviews, then 2 Principals (or 1 Associate and 1 Principal) during the second round of interviews.
As for a permanent contract position (after a few years of experience), there are no rules: there can be between 4 and 12 rounds of interviews.
The process varies depending on each fund, its size, and the number of people per team. For example, for a Large Cap fund with offices in Paris and London and whose teams work regularly together, the candidate will meet many more collaborators than in a normal process.
A typical process for a permanent contract (CDI) in a Mid Cap or Upper Mid fund after 2-3 years of experience usually consists of the following steps :
- Round 1 : Fit/motivation interview with a Principal/VP (usually in charge of recruitment)
- Round 2 : Fit/technical interview with Associates
- Round 3 : Case Study followed by a debrief with team members
- Round 4 : Meeting with a Partner
- Round 5 : Meeting with another Partner
- Round 6 : A drink or lunch with all team members for some funds
What should I expect as questions in a Private Equity interview ?
A Private Equity interview round can either be a fit/motivation round or a technical round. There are generally 6 to 7 steps in a recruitment process to join a Private Equity fund.
1 – Questions about your background
The candidate must be able to present themselves in a synthetic way by giving important elements about their background. You should be able to go through your CV, both your academic background and your professional career.
The recruiter will challenge the candidate on their academic and professional journey. The candidate must be able to indicate and detail the missions, M&A deals, or Due Diligences they have worked on (whether as an intern or a permanent employee). If the candidate mentions the Tiffany / LVMH deal on their resume or in an interview, the interviewer may ask them to elaborate, ask their opinion on the transaction. Is it a good acquisition, especially considering the state of the market? What do you think of the luxury market? Would you have made this acquisition?
For someone in strategy consulting, the interviewer can question them about a Due Diligence they carried out for an investment fund. The candidate must provide as much information as possible to the recruiter while respecting the confidentiality of transactions that are not public.
Therefore, one must always be able to explain all the lines on their resume. Mentioning a deal on their resume but not being able to talk about it in an interview can be a deal-breaker.
2 – Motivation Questions
These are fairly standard questions that allow the recruiter to understand the candidate’s motivations and why they are in front of them. The candidate must be relevant in their speech and must be able to clearly explain why they want to do Private Equity and why specifically in Small, Mid or Large Cap. Similarly, they must be able to explain why this particular fund interests them: company culture, team culture, investment strategy, etc.
Such questions quickly identify whether the candidate has applied because they are genuinely interested in the team or because they are simply looking for a place in a fund to leave M&A or strategy consulting.
The candidate must be able to construct a coherent discourse to express their motivation both for the position and for the fund : saying that they are in the process with Large Cap funds while they are in an interview for a Mid Cap fund can be very compromising.
3 – Fit questions
Naturally, over the course of the discussion, the interviewer will be able to determine whether or not the candidate and their personality are compatible with the team. Indeed, Private Equity teams are small, so the candidate must be able to get along with everyone. It is possible to judge the fit based on the attitude in the interview but also on interests and activities outside of work. It is clear that a candidate and a recruiter who share a passion such as golf or a particular style of music is a positive point that will facilitate the candidate’s integration.
4 – Technical questions in Private Equity interview
This is the part most feared by candidates. The questions asked generally concern the LBO model: one must know its main characteristics, understand how it is constructed, and be able to easily explain it. The candidate may also have to answer more traditional questions that can be found in an interview to join a bank. M&A : steps of a deal, accounting or valuation questions.
For a permanent contract (CDI), the questions will be more in-depth. For a simple internship, the candidate will be asked to complete an LBO Paper, while for a permanent contract or Graduate position, the candidate will have an additional interview round to complete an LBO case.
5 – Business Sense Questions
The interviewer will seek to know if the candidate can think beyond the numbers. This is a strategic part where one must be able to show the recruiter the extent and relevance of their research: knowledge about deals, sectors, different markets.
Few examples of Business Sense Questions :
- Could you talk about one of our portfolio company ?
- If you could invest in a company, which one would it be ?
- Is there a company in our portfolio that you would’nt have invested in ?
6 – LBO case / Strategic case
This part is reserved for people who already have 2-3 years of experience and want to join a Private Equity fund on a permanent contract (CDI). In principle, it’s a case that lasts either 3 hours, or between 24 and 48 hours. However, there are no rules and everything depends on the format chosen by the fund.
Starting from an Investment Memorandum of 30/40 pages with a lot of information about the target company, the candidate will have to create an LBO model from scratch. This allows to test their abilities to model quickly as well as their technical skills.
Following this work, the interviewer can decide to go further in the LBO case by asking more strategic questions such as : “Now that you have done all this modeling work, would you invest in this company ?”
7 – Informal meeting with the team
Once at this stage of the process, the team already has a very good idea of the candidate : they have passed all their interviews, but the goal is to see if they will get along well with the entire team. During an informal cocktail or lunch, the team will observe how the candidate behaves and reacts in society: Do they have a sense of humor ? Can they bounce back on certain elements said by their colleagues? Do they have confidence in themselves? These are all elements that can predict how the candidate may behave during a professional exchange. This informal meeting is therefore a decisive step in the recruitment process and the slightest mistake or inappropriate remark can jeopardize the entire process.