In this article, we’ll walk you through how the North America pre-MBA private equity recruiting process works for candidates who just graduated from college and currently working in an investment banking, management consulting or other related role.
Pre-MBA Private Equity Compensation: Unlike entry investment banking and management consulting where pay is pretty close across the industry, the difference in pay in private equity can be huge depending on where you end up. If you go through this process and land a job at one of the more generous PE mega-funds (i.e. Apollo, Warburg), you can expect your annual compensation to be around ~$300-$400K split between salary and bonus. The pay increase for these firms from a first-year Associate to a second-year Associate is also big so it’s possible to make nearly $500K in your second year. The rest of the mega-funds and upper middle-market PE firms pay about $200-$300K (i.e. Bain, Carlyle). From here, it goes down significantly by each firm’s size.
So it’s entirely possible that some Associates make $200-500K more than others of the same class over the 2-year program.
With that said, let’s dive into how the private equity recruiting process works.
I. Private Equity Recruiting Timeline
Below we lay out the general timeline for the pre-MBA private equity candidates. The label “Year 1” refers to the first year of the Analyst / Consultant program. “Year 2” corresponds to the second year of the program.
Year 1 June – August: Fresh graduates join the investment banks / consulting firms and begin their training
Year 1 August – September: Headhunters begin to reach out to schedule initial meetings where you meet with them to go over your firm preferences and for them to get to know you as a candidate
Year 1 September – October: Candidates meet with headhunters
Year 1 October – December: PE firms sponsor Info sessions, coffee chats and networking events
Year 1 October – December: This is the time period where 2017 and 2018 on-cycle interviews began over the last 2 years (so you only have ~1-3 months of experience). There’s no exact set schedule each year, but expect to be around this timeframe
Year 1 December – Ongoing: Off-cycle recruiting process; see below for details
Year 2 June – August: Begin the second year of your Analyst / Consultant program
Year 2 February: You start seeing peers at firms with December bonus cycle quit their firm
Year 2 May –June: All incoming Private Equity Associates quit their firm and prepare to join PE
II. The Headhunters
Background: Unlike recruiting in college, which you can just apply online or through on-campus efforts, most PE firms don’t have an online portal for you to submit an application. Instead, you recruit for the Private Equity Associate role through headhunters. Each private equity firm usually hire a headhunter to run its Associate recruiting process. After the new hire successfully joins the firm for a specific period, the private equity firm pays the headhunter a fee based on a predetermined percentage of the new hire’s compensation. In North America, this search mandate is usually on an exclusive basis. In other words, a PE firm will have only one headhunter running their Associate search. The practical implication here is that if the headhunter refuses to recommend you, it’s unlikely that you will be able to meet with that particular firm.
Their Role & Importance: The headhunters for the pre-MBA private equity recruiting process serve as the primary gatekeepers. What this means is that they are the first round of screening. It’s hard to tell when you interact with them because they’re all so nice, but they’re judging your every move and forming an opinion on you. Let’s take a step back and understand how things work. Headhunters make money if they have clients and their clients are the PE firms, not you. The people at the PE firm expect the headhunters to bring them high caliber candidates because they’re all very busy with real investment work and get frustrated when they spend time with weak candidates. And when they interview enough weak candidates, they get frustrated and the headhunter risk losing the exclusive mandate, which is very profitable.
This is particularly the case with on-cycle interviews because as we’ll elaborate below, the firms need to fill their class in short order so they need to make sure that everyone they interview are strong candidates in order to hire the best.
And each year, there’s a shocking number of candidates who are totally unprepared. You’d be surprised how many investment banking analysts can’t even get their FCF calculation right. PE firms try to minimize time on interviews so they expect headhunters to evaluate all the candidates and filter out the weak ones. That way, the PE firms can just choose the cream of the crop from an already filtered batch. The practical implication here is that the headhunter’s opinion of you is extremely important and will determine which firms they recommend you to and where you get interviews with. In practice, we’ve seen plenty of Goldman analysts who don’t get calls because they failed to impress the headhunters.
Who They Are: For the pre-MBA private equity recruiting process, there are only a handful of major headhunters that represent the leading PE firms in the United States & Canada. They are as follows (along with selected clients):
- Amity Search Partners (“Amity”): Bain Capital, Centerbridge, Oaktree, etc.
- Ratio Advisors: Took a bunch of Amity’s clients like Apollo
- Bellcast Partners (“Bellcast”): BC Partners,
- CarterPierce (“CarterPierce”): Mostly middle market PE firms on the west coast
- CPI (“CPI”): Advent, H&F, Silver Lake, THLee, etc.
- Dynamics Search Partner (“DSP”): Apax, Vista, Leonard Green, etc.
- Glocap Search “Glocap”: They do a lot with growth equity & VC firms
- Henkel Search Partners (“HSP”): KKR, Carlyle, Warburg Pincus, etc.
- Oxbridge Group (“Oxbridge”): They have a lot of middle market PE firms across the US
- SearchOne Advisors (“SearchOne”): Similar to Oxbridge, their PE client base is mostly middle market
- SG Partners (“SG”): Blackstone (PE, Tac Ops, GSO, Real Estate, etc)
Note: This is just for North America (US + Canada). Europe & Asia have different recruiting processes & headhunters.
Note that the headhunters’ client lists change every year. So PE firms might have switched to a different headhunter at the time of reading.
III. On-Cycle Private Equity Interviews
Background: This is the interview cycle that happens in the October – December of your first year (~1-3 months after you start your job). In the recent years, all of the mega-funds, except CVC, are jumping the gun and recruiting earlier and earlier. Nobody knows exactly when the interviews will kick off in advance. But as soon as one firm begins interview, the rest will follow. Just like you’re vying for the top firms, the firms are vying for the top candidates. None of the PE firms want to fall behind and lose out on the top candidates. So it’s really a crapshoot here: one day the Principal at a mega-fund running the Associate recruiting process may wake up and decide that he wants to start talking to candidates and that will trigger all other firms to kick off their interviews.
Timing: The entire process from when interviews begin to when offers are extended will be as short as a weekend for the mega-funds. Be prepared to interview at a moment’s notice. This isn’t like investment banking / consulting recruiting where they give you interview notice days / weeks in advance. You may get a call on Friday afternoon for an interview that evening. The on-cycle process is a huge frenzy and most of the large funds will finish interviewing in 3-4 days. Offers would have been extended by the end of the first week. The upper middle market firms then go next and similar to the mega-funds, they wrap things up in relatively short order as well. Because of this rushed schedule, be prepared to interview on the weekend and at odd hours like 2am.
The critical takeaway here is that you need to be interview-ready by October. Don’t make the mistake where you wait until you get the interview notice to start preparing because that would be too late. GoBuyside does a great job keeping everyone up-to-date by sending out email alerts where they tell you when the process has started and what firms are interviewing, so definitely sign up for their mailing list.
Format: Most PE firms will have a mix of a first round interviews, a modeling test / case study, and a final round with the Partners. But there’s no uniform order so firms have different practices. For example, Apax will have you go through the modeling test and a first round interview simultaneously. Meanwhile, Centerbridge will only let candidates who pass the first round do the case study. The key characteristic they’re screening for through these interviews is whether you can think like an investor.
Offers: Offers are extended shortly after interviews. Unlike on-campus banking / consulting recruiting where the schools have strict policies and require the employers to keep their offers open for an extended period of time, the PE on-cycle offers will often last less than 24 hours. Firms are eager to finalize their class and hire the top candidates so they need to extend the offer to their next choice if you aren’t going to accept. Otherwise, they risk losing you as well as their second choice. Asking to extend the timeline is very risky and we’ve seen instances where offers are rescinded.
IV. Off-Cycle Private Equity Interviews
Background: This is the interview cycle that happens outside of the on-cycle interviews and last throughout the rest of your first and second year. A lot of middle market firms don’t participate in the on-cycle process and prefer to interview candidates who have at least 1 year of experience. There are also firms who participated in the on-cycle process that will recruit in the off-cycle process as well. Therefore, there’re still a lot of PE opportunities that come up after your first year. However, off-cycle interviews can be much more difficult to convert into an actual offer than an on-cycle interview. There’s no rush for the firms so they 1) take their time to try to meet with all the qualified candidates and 2) want you to meet with more people, often everyone on the team, before extending the offer.
Timing: Unlike the on-cycle process, the off-cycle interview process is more extended and will last several weeks. If you do well, you’ll generally hear back regarding the next round shortly after but offers can take a while. There’s no rush here like the on-cycle process so things generally take longer.
Format: Similar to the on-cycle process on the format, except we see more “take-home” case studies here. Firms are not in a rush so they give you several days to do a more comprehensive case study.
Offers: Similar to the on-cycle process, offers don’t last long here either. You might have a bit more time than the on-cycle offers, but nothing that last several weeks.
V. Private Equity Interview Questions
Background: Unlike banking / consulting interviews, you won’t get a private equity offer just because you have a compelling story for why you want to do PE. They’re still going to ask you “Why PE”, but that’s more of a check-the-box sort of question as opposed to a differentiating factor in banking interviews. You can have the best reason for why you want to do PE and why you want to work for that specific firm, but if you can’t show them how good you are, you won’t get the offer.
What PE Firms Look For: PE firms focus a lot more on 1) how good you are and 2) do they like you. The former is demonstrated through a series of technical & deal questions as well as references and the latter comes off from the overall vibe. The practical implication here is that the interviews are much more technical and deal discussion heavy than banking interviews. Which is why walking through the deal is just as important as, if not even more important, than walking through your resume.
Importance of Deal Experience: There’s been a long debate where some people say that deal experience matters and others say they don’t. Both have their points. The reason deal experience is so important here is that having an announced deal creates a critical talking point. It creates an opportunity for you to demonstrate that you can think like an investor that candidates without deal experience simply don’t have. And from the interviewer’s perspective, this is really one of the best measurement they have because this is essentially what you’ll be doing in PE. So if can blow them away with your knowledge of your deals, things will go very well for you.
For candidates without a publicly announced deal experience, it’s totally understandable. You can still land offers, but you will just have to demonstrate that you can think like an investor through other means. If you don’t have a deal that you can talk about, then interviewers sometimes try to talk through either a pitch or pick a random company and evaluate your investment acumen through these channels.
Types of Questions: Different firms have different formats, but a typical interview usually starts with the interviewers introducing themselves and asking you to walk through your resume. Then there’ll be a mix of technical and behavioral questions. The technical part usually involves a paper LBO – you MUST be able to do a paper LBO without a calculator. The rest of the time is going to be spent on deal discussion, where the interviewer tries to assess how well you understand the deals you worked on. This is one of the most important parts of the interview. Fail this part and the interview won’t last very long.
If you’ve spent time trying to break into investment banking, chances are you know that people talk a lot about different groups and their exit opps. In most instances, the distinction among groups is small. When it comes to the private equity recruiting process, there are only 3 categorizations among groups that actually make a meaningful difference: 1) the absolute elite groups, 2) the groups where you don’t pick up the relevant technical skills that PE firms are looking for and 3) all other groups where placement is much more attributable to how you perform in interviews than your group name.
The first category is the likes of GS TMT and MS M&A. GS TMT has produced some of Wall Street’s best and brightest and MS M&A is one of the strongest M&A group on the street. If you’re in one of these two groups, congratulations. You will get looks across all the major PE funds and your competitive advantage is really yours to lose. The second category are IBD groups such as ECM, Strats, Corporate Derivatives, etc. These groups don’t deal as much with traditional corporate finance or execute M&A transactions. There are plenty of strong Analysts from these groups. However, they have a very difficult time recruiting because of the group they’re in. Just convincing headhunters to get them interviews is a huge uphill battle. Most groups are in the third category, where your group name will neither help you nor hurt you.
Your recruiting outcome here is really dependent on how good you are as opposed to whether you’re in DB Industrials or JPM FIG.
Fact: A well-prepared Analyst from DB can do much better than someone incompetent from GS TMT.
The Next Step
So now you know how the pre-MBA private equity recruiting process works. For the next step, we suggest you learn what it means to think like an investor.
Questions? Leave a comment and we’ll get back to you.
About 10X EBITDA
We are a small team composed of former investment banking professionals from Goldman Sachs and investment professionals from the world’s top private equity firms and hedge funds, such as KKR, TPG, Carlyle, Warburg, D.E. Shaw, Citadel, etc. Our mission is to cultivate the next generation of top talent for Wall Street and to help candidates bring their careers to new heights. We’re based in the United States, but we have expertise across Europe and Asia as well.