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 “who” of PE recruiting. You can find all the posts in this series here.
So Who Gets Private Equity Jobs Anyway?
Because a wide range of people tend to be interested in breaking into private equity, let’s talk briefly about each of the major candidate groups.
Current private equity analysts + associates
Private equity firms do hire from other PE firms and competitors — after all, if you’ve learned the necessary skills to do private equity investment analysis somewhere else on another firm’s dime, you are simply that much more attractive, because you can come in and hit the ground running.
Consequently, if you are already working in a private equity job at another firm, even if it’s smaller, it can be a little easier to hop up to a bigger PE firm compared to an investment banker.
Assuming you’ve cleared any concerns about your investment analysis skills (e.g., modeling, corporate finance), personality fit is going to be one of the most important things to show. Because PE shops tend to be very small (perhaps fewer than 10 professionals on the low end to the low hundreds at the very biggest firms), they want to make sure you aren’t going to rub against their office culture. And since private equity firms can also afford to be super selective, while they will definitely grill you on your past deals and modeling skills, personality fit is going to be the most important factor to your candidacy.
1st-year banking analysts who are going into their 2nd year are the biggest demographic that private equity firms (and therefore headhunters) are targeting. If you’re at a big brand-name investment bank, it is likely that you will be pinged by headhunters around 6 months after you start your banking analyst program — typically early in the new year (e.g., February).
They’ll ask you to send them your resume and some will ask you to come into their offices for 1:1 meetings so they can learn more about your background, skills, and deal exposure. Once they get an understanding of who you are, where you are coming from, and what you’ve worked on, they will start sending your resume around to various PE firms they have relationships with (and which they believe you have a decent chance at getting an interview and offer with).
If you are not at a big bulge-bracket investment bank, it will be hard to get in front of a headhunter, much less a PE firm. Unless you have a great inside connection and can bypass the early parts of the private equity job screening process, it’s just very difficult to transition into PE from a mid-market or boutique bank. Not impossible, but very hard.
Many private equity firms can be challenging for management consultants to break into because of the sheer uphill learning curve required to handle all the corporate finance and modeling work a typical PE associate does.
But lots of management consultants want to make the switch to PE, and the many of these candidates would have a better shot at getting interviews at firms with a well-established track record for hiring consultants — Bain Capital, Golden Gate, TPG, Carlyle, Huntsman Gay, Silver Lake, and a few others.
Some mega-caps like KKR also have pure operational divisions (e.g., KKR Capstone) to help manage and optimize portfolio companies, and many consultants do quite well here, although it’s not strictly private equity investing — it’s operational turnaround.
That being said, if you ask fund GPs, they will tell you it is pretty challenging to do any deals whatsoever in today’s PE investing climate — not only because of the sluggish economy, but also because PE auctions have become very price-efficient, with firms searching high and low for any opportunity to deploy capital, bidding prices way up, and underwriting lower returns as a result.
Because deals aren’t presently so plentiful, consultants may actually be more attractive than traditionally has been the case because many firms are not doing a whole lot of deals, but rather trying to streamline and improve operations at their existing portfolio companies.
If you’re doing M&A, corporate finance, strategy, or business development in a relevant or adjacent industry at a Fortune 500 company, you also stand a chance of “lateraling” into private equity.
But your best bet is to focus on specialty firms or smaller firms that focus investing in your current industry (where you already have an edge), rather than mega-cap generalist funds. So if you work in corporate development at HBO, then try going after mid-market or specialty PE firms that focus on media and communications.
If you have more than a few years of work experience under your belt in any of the above professions / industries, the recruiting process will not be standardized for you. It will be entirely driven by the hiring needs of specific PE firms, and the process may be drawn out given the lack of any formal timeline.
Your challenge will be to tell a convincing story about why you are now interested in re-inventing your career to become an investor, especially if you don’t come from a hard finance background. You will also need to show that you can handle financial and investment analysis thoroughly and insightfully — even though you may not be cranking the financial model, you will need to prove that you can do it, that you deeply understand the key drivers of private equity returns, and that you have a track record of excelling in your prior jobs.
For experienced laterals, you should probably aim outside of the mega-cap funds and instead target firms that are more niche instead. You’ll face less competition (and skepticism), and potentially even have an edge if the PE fund specializes in something you already have a background in.
MBAs + Undergrads
For MBAs, recruiting can be tough, but especially if you don’t have pre-MBA private equity experience. One PE principal I worked with before told me: “We would never look at anyone who didn’t do private equity before business school.”
If you are coming out of business school, it is really difficult to get a PE offer unless you did PE before your MBA, or at least were a top-performing investment banking analyst at a bulge-bracket bank. Not impossible, but just really hard.
Undergrads are an exceptionally small group of candidates because they generally don’t have the experience or skills needed to perform well in private equity.
Only one large mega-cap fund that I know of recruits directly out of undergrads (typically only from Harvard or Penn) — Blackstone. Even then, only a couple students get a full-time position with Blackstone right out of undergrad, so this isn’t really a common entry point for candidates. You need to have a previous investment banking internship (i.e., at Goldman Sachs specifically) or a private equity internship (i.e., at Blackstone itself) or be a damn good networker — pretty uncommon for undergrads.
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.