What you need to know about venturing out into the private equity job market
You’re an experienced private equity (PE) professional and you want a new job. Be warned: making a lateral move within the PE industry is nothing like getting your first job on the buy-side.
Moving into a first job in PE from investment banking is all about winning – there can be 300 applicants for a single position. Once you’ve secured your first job in PE then moving on to a mid-ranking, but still junior,‘associate’ position in the industry is statistically easier. But, you’ll probably be leaving money on the table and will therefore need to ensure the fund you’re moving to is the right one.
“When you already work in PE, the odds of getting a second job are very high – there are usually only 15 applicants for every role,” says Gail McManus, managing director of Private Equity Recruitment. “It’s very much about scoping each other out to ensure a good fit for everyone. Associates with deal experience will just about be eligible for carried interest at their current employer, which is a big commitment. They won’t want to throw it away for the wrong career move.”
In many cases, associate roles aren’t even advertised. Hephzi Nicol, a former Lehman Brothers banker who now places young professionals in alternative investments through her firm Kea Consultants, says that rather than applying for vacancies, securing an associate position can simply involve, “a mutually beneficial meeting between a candidate and a private equity firm.”
If that meeting goes well, you might be called back for more. It’s not unheard for private equity funds to conduct three to five rounds of interviews with at least ten different meetings when they’re hiring associates. Here’s how to make it through:
1. Know how to big up your deal experience
When a fund is hiring you into an associate role, it will want to see that you have deal experience. If you’ve never closed a deal, Nicol says it won’t be clear that you can add value.
At entry level, young investment bankers trying to get into PE have to prove they can “think like a buyer” with a view to the long-term potential of an investment. After a couple of years’ experience in private equity, those venturing on the job market are doing so because they want a change of scene. “Most lateral moves are generalists looking to specialise, or – for example – energy focused PE professionals not wanting to get pigeon-holed,” says McManus. “It’s rare we see a like-for-like move.”
The key, therefore, is to ensure you can apply your transaction experience to the sector you’re looking to move into. Demonstrate technical knowledge of the sector you are gravitating to, and outline precisely how the tasks you were responsible for could be applied to the new role, says McManus.
2. Remember, everything is about fit
It’s likely in the first interview you will be screened out by the very top level, says Nicol. By her reckoning only 20% of private equity firms even have HR functions, and these are the large companies. It might seem intimidating to have your technical expertise assessed by the firm’s principal, but remember that as important as this knowledge is, they are ultimately assessing whether you’d fit into the firm.
“Every interview is overlayed by fit requirements, so you need to research the company culture and know whether you’d really fit in,” she says. “Smaller firms often recruit through consensus, so you could meet all the important people in the firm before they will offer the role.”
3. Be prepared for a challenging case study
If you’ve already interviewed for a PE fund at analyst level, you’ll be familiar with the case study interview. - PE firms give candidates a certain amount of information about a company and then ask them convince them of its investment potential, or otherwise. This usually takes an hour and they will also be required to undertake a financial modelling test. There’s always a certain amount of “gentle guidance” about what they should be presenting here, though, says Nicol. The main difference at associate level is the amount of rigor candidates are subjected to.
“These tests could be anything from three to six hours long. You may be required to do the modelling then and there, or you may be given time to take it home and create your case,” she says. “This is a dry run for the day job. You will be directly challenged on your presentation and expected to have created a fully-fleshed out investment case.”
4. You need to maintain the interview energy
Private equity interviews can, at this stage, become quite repetitive, says McManus. You will be subjected to a lot of interviews and often be asked the same sort of questions about your CV, your views on relevant financial and economic issues and deal experience. It can get trying. “The important thing is to keep the energy up,” says McManus. “This might be the fifth time you’ve told the same story, but it’s the first time the interviewer will have heard it.”
5. If you do meet with HR, emphasis your cultural fit
Larger firms do have HR departments and they are the first line of defence. They will be looking for you to say all the right things about deal experience and technical expertise, as well as know the ins and outs of any company developments. However, they are also the “gatekeepers of company culture”, according to McManus. You would be wise to research how the company brands itself, therefore.
6, Know your reasons for exiting
“A lot of people leave at this stage because, actually, they don’t have a lot of deal involvement and want more responsibility. Obviously, this is not the right reason to be bringing up in the interview,” says Nicol. It is, however, important to have a good way of explaining your reason to move that neither bad mouths your current employer nor presents you as vaguely incompetent.
“You should have more knowledge about the industry and a better understanding of what it is you want to do with your career,” says Nicol. “Maybe you want to move into growth equity, or specialise in technology companies. Maybe you want to move away from, say, energy into a larger generalist fund. Know your career story.”
7. Stay good at the day job
Finally, don’t forget where your references will come from. If you don’t see yourself at your current employer in the long-term, it’s tempting to take your foot off the gas, but this could be a mistake. Sure, you may do enough to get by, but if you’re job hunting – and interviewing – expect informal enquiries about you to people who matter at the firm. “What you want is a glowing recommendation – or as glowing as it gets without deliberately selling your employee to a potential competitor – not a ‘well, they’re not bad’,” says McManus. “Private equity is a small world, so maintain your relationships."