Assuming that you’re being hired into private equity after a couple of years in investment banking, firms on the buy-side expect technical knowledge. This means that you know how to structure a discounted cash flow (DCF) and that your financial modelling skills are top notch. You will likely have been trained by a bulge bracket investment bank, after all.
If you come from investment banking, you will have a background in one of three areas – M&A, financial sponsors (dealing with M&A deals involving private equity firms) or leveraged finance (funding deals involving a higher proportion of debt than normal). If this is a given, what other skills do you need to work in private equity?
“A successful private equity career requires not only mathematical but also inter-personal skills. Numerical ability - the skill to process numbers swiftly and efficiently - is important, but so is relating to people,” says Guy Hands, founder and chairman of private equity firm Terra Firma. “Businesses ultimately are about individuals and their personalities and to be successful in private equity you need an understanding of the human dimension too.”
To be successful in private equity you need an understanding of the human dimension too
There are also more prosaic factors at play when going for a private equity job. For a start, there’s the fact that the interview process will involve meeting just about everyone working in a front office job – even large private equity firms have 40-50 people in client facing roles – and this means being able to fit in.
“Every candidate has to pass what we call the ‘beer test’ or the ‘flight test’,” says Hephzi Pemberton, a former Lehman Brothers banker and co-founder of Kea Consultants, which recruits junior bankers into hedge funds and private equity firms. “The interviewer asks themselves whether they’d like to go for a beer with the candidate, or if they could survive a long-haul flight with them.”
More than this, though, you must demonstrate that you’re part of an elite group. If you’re a banking analyst, you must be top-ranked – or at least in the top 10-15% - and the university you attended is less important than the degree score you gained. Ideally a 1st, but definitely no lower than a 2.1.
“You need to show that you’re a winner,” says Gail McManus, chief executive of Private Equity Recruitment. “This can mean finishing top of your analyst class, being an elite long-distance runner, a top chess player or captain of your football team. But you must show that you’re among the elite.”
You need to show that you’re a winner
“As a junior, you need hunger!,” says a former investment banker who’s now a director at a private equity firm. "You have to be motivated. It is a given that you will have no or little relevant experience, so it is about demonstrating that you are focused in achieving what you have done. You were captain of X team at school, you lead Y university team to victory, you were awarded XYZ, you launched a business at university and made $XXX. Show you have the right stuff.”