How Does the Recruiting Process for Private Equity Jobs Work?

This post is part of a short series that covers the who / when / where / how of landing a private equity job. This post is about the “how” of PE recruiting. You can find all the posts in this series here.

How Does the Recruiting Process for Private Equity Jobs Work?

Headhunters

Most PE firms use headhunters to source candidates, for at least two reasons.

One reason is that PE firms are rich. They don’t want to be bothered with having to deal with HR internally, so they choose to outsource it instead; headhunters charge them a lot in finder’s fees for successfully placed candidates, but they do a good job at it and the amount is “nickels and dimes” to PE firms which can compensate even their lowest-ranking investment professionals 6-figures.

The second reason is simply a matter of scale — unlike investment banks, which have huge departments and need to fill incoming classes that can easily be 100 analysts / associates or more, each PE firm typically only needs to recruit a handful of associates each year, if even that many. They may recruit as little as 1 (or even none) or as many as 8, but either way it isn’t a lot. Even the biggest mega cap funds tend to recruit fewer than 10 new associates per year. So it doesn’t really make sense for the firm to keep an HR person on-staff full-time.

This means that as you begin preparing to interview for private equity jobs, you will need to build relationships with headhunters to get your foot in the door, assuming you don’t already know people who work at PE firms.

The best headhunters I know of and have worked with are SG Partners, CPI, Oxbridge Group, Pinnacle Group, Weatherly Group, and Phoenix Group International. They have the best relationships and track record with placing candidates at elite PE firms, they get the highest quality candidates, which means the best PE firms tend to work with them.

If you are working at a big investment bank or brand-name consulting firm, you may be contacted by headhunters first sometime in the latter half of your first year as an analyst.

If you are working at a smaller bank, consulting firm, or corporate development department and are not contacted by headhunters first, a good way to get on their radar screen is to get referred by someone who either knows them or has worked with before. You can also try cold e-mailing or cold-calling them, but that tends to be less productive (though not impossible).

Remember, headhunters are constantly evaluating whether it is worth spending time to represent you, and the way they decide that is by believing you have a high likelihood of getting a PE offer (and hence will generate a finder’s fee for them). If you keep this in mind and underscore your “hirability” — why you are a good bet because you have a strong chance at getting a PE offer — then you will be in good shape to catch the attention of headhunters.

Initial screen  

Your first “meeting” will likely be an in-person interview with a headhunter representing the PE firm. Their sole goal at this stage is to filter out candidates who don’t have the right qualifications (e.g., not enough finance knowledge, not enough Excel skills).

This can be demonstrated by discussing your deal experience, client cases and projects, and / or financial or other modeling exposure — and while headhunters are not themselves finance specialists, they know enough about finance to smell B.S. and to tell what’s exaggeration, etc. In fact, many of them used to be investment banking analysts, and these headhunters actually do have finance knowledge to really evaluate your candidacy.

Make sure you pick good deal / case examples and be able to clearly explain your role on them, where you personally made an impact or significant contribution, and highlight the specific modeling work you did as well.

When you meet with headhunters, it is very important to impress them with your drive, intelligence, thoughtfulness, and communication skills. They make an internal cut right there for the private equity firms and filter you out (or in) based on your knowledge and experience — and whether you can pass the “airport test.”

That’s right, technical skills are not enough. You have to also be likeable. Even in these early meetings, try to develop a rapport and relationship with your headhunters. Talk about hobbies, places you’ve traveled, interesting personal projects you’ve worked on — anything to strike a connection and show that you can pass the “airport test,” even if it has nothing to do with finance.

Remember, if your headhunter or interviewer doesn’t fundamentally feel you are personable, then it doesn’t matter how qualified you are because they are not going to recommend you to the next step of the interview process.

As with any interview, demonstrate you are thoughtful, articulate, intelligent, hard-working — and personable — and you will do well in passing their “smell test” screens.

It may sound obvious, but it’s worth repeating here given how often it can be forgotten: Do not underestimate — and especially do not mistreat — your headhunters by thinking they are some useless HR department like at a big company. They are literally the gatekeepers between you and elite private equity opportunities, and they are pretty good at doing their job and finding great candidates. So treat them with respect and professionalism and you’ll be off to a good start.

Following your initial screen, your recruiters will start to send your resume to specific PE firms they have relationships with.

On-site interviews

Interviews for private equity jobs can go in many different directions depending on your background, skills, and experiences — as well as the firms you are applying to. My own PE interviews had huge variance in topics covered, technical finance questions I was grilled on, personal fit questions asked, and sheer difficulty. There are some general guidelines to keep in mind, however.

First, interviews at mega-cap funds will often test extremely technical finance knowledge to see how well you understand different accounting, valuation, and tax concepts.

Smaller PE firms tend to place greater emphasis even from the early stages on personal fit, and they want to see how hungry and motivated you are to perform well as a PE associate.

Most PE firms will test your financial modeling skills through an on-site LBO modeling test, as well as your general business / strategic judgment through case interviews.

For LBO modeling tests, you should practice building simple, short-form LBO models quickly in your free time (in under an hour) — you can download public company financials from Bloomberg, CapIQ, or even E-trade (or wherever you might have a personal investment account).

For case interviews you may encounter, focus on key analyses surrounding revenue growth, cost streamlining, customer / supplier risk — that sort of thing. Don’t try to be too clever with complex analysis. Being simple, clear, and articulate is more impressive than being complex in your answer.

Know your own work history — deals, cases, projects — impressively well. If you are coming from a non-finance background, focus on your operational experience and tell a compelling story about how you can pick up the finance skills and be a successful fit for PE.

Offers

It is pretty rare to be in the position of having offers for multiple private equity jobs to evaluate, since many firms give offers that explode in a day or two, or even on the spot, and some firms even agree to extend offers only if you agree beforehand to accept it! For entry-level roles like associate and senior associate positions, your compensation package is generally non-negotiable, so there isn’t much point in trying to negotiate. Packages are pretty standardized and competitive anyway, and there isn’t a huge amount of variation among the high vs. low between firms.

If you are lucky enough to get a private equity job offer, the real question you should ask yourself is whether you truly want to go into PE at all — and whether you can envision being happy for the next few years at the firm that is trying to court you. If both those answers are yes, then make your decision and coast on “easy street” for a while. Otherwise, revisit the drawing board to figure out what would be a better fit — better to do that self-reflection upfront now than to be stuck later in a job or role you don’t enjoy!

 

Found this series useful?

Be sure to check out our PDF guide “How to Nail Your Private Equity Interview (whether you have finance training or not)” for in-depth tips and strategies on how to successfully interview for jobs at top private equity firms!

Also be sure to check out our step-by-step Private Equity LBO Modeling Training Videos for walk-through tutorials on how to build an LBO model, navigate Excel with ruthless efficiency, and rapidly create an LBO PowerPoint deck to present to your PE interviewers.

Andrew Chen

Andrew Chen received an associate offer, without any formal LBO experience, on his first attempt at applying for private equity investing positions in the competitive San Francisco Bay Area. He worked for Huntsman Gay Global Capital, the Bain Capital spin-out founded by the industrialist Jon Huntsman, former Bain Capital Chairman Bob Gay, former San Francisco 49ers Superbowl quarterback Steve Young, and including former CFO of Citigroup and American Express Gary Crittenden. Andrew was previously a member of the Corporate Finance & Strategy Practice at McKinsey & Company and holds a J.D. from Harvard Law School. You can follow him on Twitter and .

Opt In Image
Get our FREE 10-part email mini-course on how to break into private equity: networking, interviewing, and LBOs
(No spam or BS, ever. Unsubscribe anytime.)