GUEST COMMENT: How to land a private equity position straight out of university

I've been incredibly fortunate in obtaining an internship opportunity in the private equity business of a bulge bracket bank. This article is intended to provide a guide to anyone hoping to do the same.

Don't discount the role of luck, and previous internships

If you think it's difficult to get a graduate or intern position in an investment bank, it's even harder to do so in private equity. Both standalone divisions of PE shops, and PE divisions of investment banks, hire very few interns.

If you're going to be successful, you will therefore need luck. There's no real formula to success, but there are some preconditions.

Realistically, if you're going to obtain a structured private equity internship, you should have interned in M&A previously. If you haven't had any previous relevant work experience, you'll need to demonstrate at least some financial modelling skills or experience in order to pass the screening process (eg, It will help if you can model a leveraged buyout).

Be prepared for a very technical interview process

PE interviews for undergrad tend to be a lot more technical than a normal IBD interview.

For my final round interview, I was interviewed by eight people in four 2 on 1 interviews. It is very much like an Oxbridge entrance interview.

They will create an investment scenario and guide you through each step. Remember the important thing is to tell them exactly what you are thinking, rather than think of it all in your head then tell them the answer.

For example, they may tell you the EBITDA of a company, the multiple the company will be purchased at, the leverage and the cost of debt then ask you for the RoE (return on equity). Don't worry - they will help out if you're stuck.

At the end of the case, when you've worked through the calculations, they're likely to ask you whether you think the assumptions are reasonable and whether it's a good investment. This could be that whether a leverage of 60% is reasonable in the current market, RoE of 30% good or bad etc.

Again, no right or wrong answer here, but it is the perfect time for you to show off your extensive market knowledge.

Show you'll fit with the team

Depending upon the interviewers, you may also be asked a few 'fit' questions. They'll want to know whether you're involved in any investment activities and whether they're on your personal account, or part of the university investment club.

They'll also definitely grill you on which investments you've made and why! It's therefore a good idea to prepare a few examples of the stocks you invested in, and two or three reasons to support your investment decision.

Prepare to explain why you've chosen PE

Another thing I was always asked was why lots of investment banking analysts always want to jump to PE eventually.

I always answered that the beauty of the buyside lies in the mentality. Evaluating and then buying an acquisition is much more exciting than simply executing a deal. PE requires a perfect combination of consulting and investment banking skills - not only financial analysis, but also strategic thinking.

However, it's also worth mentioning that there's an element of 'the grass always looks greener on the other side.'

Essentially, the day to day work as a PE and IBD analyst isn't too different, but PE analyst may have better hours. With regards to pay, there will be very little difference if you are doing BB IBD or BB PE (Base + Bonus).

Personally I'm attracted to PE because it's more entrepreneurial and I love to learn how businesses operate, rather than just their financial performance. However, whatever it is you want to do in the future, I am sure doing an internship in either IBD or PE will only help you in any future job search.