“How can we fight this fight with the brightest and best educated rushing off and working night and day to do private equity deals and derivatives trading?”
Derivatives trading… maybe not so much anymore. But PE continues to be a big draw, pulling in bankers like bees to honey – despite the fact that most firms are barely doing any deals lately.
Yes, we’re at that stage of the year when newly minted Analysts (and some Associates…) are thinking about what they’ll do next, only months after starting out in investment banking.
But no one seems to know much about the recruiting process, how it works, who’s involved, what you need to do, and how long it takes.
Who – Firms & People Involved
I normally avoid discussing specific firms (no, I still won’t “rank” banks. sorry), but we’ll break that rule here.
Private Equity Firms
I divide PE firms into “The Big Guys” – Blackstone, KKR, TPG, and anyone else focused on the largest deals – and “Everyone Else” – middle-market and smaller firms that do everything from tiny $20MM deals to acquisitions up to the hundreds of millions or low billions.
Even with a terrible market, each firm recruits at least a few new hires each year (places with only 5-10 “investment professionals” might just hire 1 person).
Almost every PE firm uses headhunters to recruit candidates.
These aren’t banks where you have tens of thousands of employees and room for HR – these places are lean and efficient, and they view recruiting as something that can be outsourced (at least the “getting resumes” part of recruiting).
So if you don’t have a wide PE network, you need to contact these headhunters to have a shot at breaking in.
There are only 3 worthwhile firms for PE recruiting: Oxbridge . SG Partners . and CPI . Theoretically, Glocap and a few others do it too, but the highest-quality (and highest-hiring-probability) opportunities – at both large and small firms – are found through those three.
How to Contact Them
Depending on the bank / group you’re working at, you may actually be contacted by the recruiters first. But if you’re not, the best method is to get a referral from a friend or co-worker who knows them.
Failing that, cold-emails and cold-calls also work – but it’s hard to get on their radar if you don’t have a brand-name bank on your resume.
A wider set of candidates tend to be interested in PE compared to banking, so let’s go through the major categories.
Students – Undergraduates & Business School
This is a small group because few undergraduates are qualified. To have a shot, you need to have a previous banking or PE internship and go to a school where firms actually recruit undergraduates (or get really lucky networking).
At the MBA-level, it’s not much easier. As one PE principal once put it to me, “To decide who gets an interview here, we…. look at who has done PE before.”
It’s really, really tough to get in out of business school unless you’ve done banking/PE before. And these days, you’d be competing against a ton of laid-off bankers and financiers so it wouldn’t exactly be “easy” even if you’ve had that experience.
Investment Banking Analysts
Current Analysts are the biggest group that headhunting firms target. If you’re at a bulge bracket, chances are that you’ll be contacted in January or early February by headhunters, meet with them, and present your story, background, and deal experience.
There is a fairly large bias against anyone who’s not at a bulge bracket. It would be hard to move from a middle-market bank to KKR, for example, unless you had a great connection there and could go around the screening process.
It is incredibly important to impress the recruiters you speak with, because they filter you based on your knowledge/experience and whether you could pass the “airport test.”
Do not underestimate the importance of headhunters – they are literally the gatekeepers for PE recruiting.
Consultants / Anyone Else Working in Adjacent Industries
Lots of management consultants want to make the switch to PE, but there is also a bias against anyone from a non-finance background. If you’re coming from a consulting background, you’re better off targeting firms that are known for hiring consultants (e.g. Golden Gate Capital. which hires Associates primarily from Bain ).
Or you could go for anything smaller and more focused on operational improvements / turnarounds as opposed to the “financial engineering” that you see at larger firms.
This is just speculation, but in the current market, consultants may be gaining an advantage because most firms are not doing deals – they’re just improving their existing portfolio companies.
If you’re working in a closely related industry, like corporate finance / strategy / business development at a Fortune 500 company, you also stand a chance in the PE recruiting process.
Your best bet is smaller firms and anything that focuses on a specific industry – so if you worked in Disney’s corporate strategy department, go for middle-market media-focused firms.
Private Equity Analysts / Associates
Private equity firms also hire from competitors and other firms in the industry.
If you’re already in PE at a smaller firm, you won’t face as many obstacles in moving somewhere bigger as a boutique banker would.
Since these places are very small (Blackstone, the largest, only has around 500 “investment professionals”), fit is super-important and they can afford to be highly selective.
You’ll be tested on your modeling skills and deals, but fit is key to closing the deal if you’re making a lateral move.
Another category of recruits: anyone who’s at the mid-level in an adjacent industry like consulting or corporate finance.
If you’re in this category, you probably have a diverse set of experiences, so the process will be less standardized.
You need to figure out a coherent story that shows why you’re so interested in becoming an investor – even if you’ve had a string of several different jobs over the past 5-10 years.
Rather than aiming for the likes of KKR and Blackstone, you’re better off going for anything that’s more niche – if you’re an environmental consultant, look into any smaller firms that are doing clean-tech or environmental investments, for example.
Managing Director / Partner-Level Hires
Another category of recruits, Partners / Managing Directors can also hop from firm to firm, moving from investment banking to PE, or from PE to PE, or almost any other combination.
At this level, it comes down to how well you know the Partners at whatever firm you’re moving to. Anyone in this position can “do the work,” so it’s often more about pre-existing relationships – as opposed to more junior hires, where you’re less likely to know anyone in advance.
When – The Timeframe
This one is greatly dependent on who you are and which firms you’re applying to – you could say there are 3 different “categories” of timeframes.
Large-Cap PE Recruiting
The largest firms start contacting bulge bracket analysts in January/February, continue speaking with them through March, and usually conduct interviews and make decisions in April/May.
These dates refer to recruiting for the year after – so if you get an offer in May of this year. the job would start in the summer of next year .
Middle-Market and Smaller Recruiting
This is a bit more random and the process is less standardized. In general, smaller firms start later – usually right around the time the biggest PEs are
finishing up with recruiting – and continue on throughout the fall of the given year.
There’s usually a drop-off in recruiting into the winter, only picking up again in the beginning of the next year.
The timeframes above refer to recruiting for entry-level hires – Analysts / Associates, mostly coming from investment banking backgrounds.
If you’re more experienced and are coming in at a higher level, the dates above may not apply to you. Particularly for anyone at the senior-level, hiring is done on an “as-needed” basis, and there’s no set number of recruits each year.
Where – Locations
The above descriptions refer mostly to private equity recruiting in the US. In other regions, especially anywhere without a mature industry, the process is more haphazard.
I’m not an expert on how it’s different in China vs. India vs. Estonia, for example, but if you know something about this and could tell us how it’s different in your own country, feel free to contact me and I’ll update this article.
Within the US, there’s some bias toward staying in whatever location you’re currently in. Anyone at a West Coast office will more likely speak with West Coast recruiters and get West Coast opportunities. Same for anyone in New York, Chicago, etc.
This doesn’t mean you can’t move elsewhere if you want to.
But as you progress within finance, you do become more specialized – whether by industry, geography, or both.
Why – Living the Dream?
It’s 2 AM and you’ve just finished up a massive pitch you’ve been working on. You start working on your private equity resume and suddenly a thought hits you… “Why?”
Why you’d want to move into private equity from another field is an oft-ignored part of the entire recruiting process.
We covered a lot of this in The Myth of the Buy-Side Job. but recall that private equity will not be a significant improvement to your lifestyle (in most cases). This is especially true at the biggest firms, where hours can be worse than banking.
There’s some truth to getting paid more than you do in banking / consulting, but only a few firms guarantee specific bonuses.
In some cases, you may actually take a pay cut to move into PE – especially if you are a senior-level executive elsewhere or you’re moving in from another industry and you get “demoted” in the process.
As with anything else in finance, pay / “improved” hours / models and bottles (come on, you know I had to include at least one reference in this article) are poor reasons to do PE.
The best reason: if you’re interested in becoming an investor – either moving up the ladder at one firm, starting your own investment firm, or doing something independently (as an angel investor. for example).
Oh, and if you think PE experience makes you a shoe-in for Harvard Business School, think again – these days a lot of laid-off financiers are going back to school and admissions committees are losing their love for pure-finance-looking-guys/girls .
How – The Recruiting Process
How does the recruiting process actually work from beginning to end?
The larger firms are more standardized and follow a process similar to bulge bracket banks, whereas smaller firms have more extended processes and take longer to make decisions.
The first thing any headhunter / recruiter / PE guy will do is ask for your resume. We’ve covered private equity resumes before, so no need to go into that in detail again.
You should spend most of your space on whatever experience is most relevant – for a banker, this would be M&A / Leveraged Finance / Restructuring deals; for a consultant, it would be any finance-related clients / projects; for anyone in business development, it would be acquisitions you worked on.
Go into detail on the best deals / clients / projects to speak about in interviews and reduce the rest of your experience.
Your first meeting is usually with the recruiter representing each PE firm. They’re trying to weed out anyone unqualified and assess who has good modeling / deal experience.
Make sure you pick the right deals (more on that in Private Equity Resumes ), and can explain how you made substantial contributions / did significant modeling work for each of them.
And make sure you come across as personable – a lot of my initial meetings were spent discussing adventures in Asia and other random topics that had nothing to do with finance.
It’s like anything else in business: you can be the best-qualified person in the world, but if the person you’re speaking with doesn’t like you, he or she is not going to work with you / promote you / recommend you.
Following this initial meeting, recruiters may introduce you to specific firms (if you’re deemed “worthy”).
Interviews can be a wild card and depend greatly on your background and what you’re applying for. We covered a lot of this in Private Equity Interviews. but here are the most important points:
- Nearly all PE interviews involve an LBO modeling test, case study, or both .
- Large-cap PEs will focus more on technical questions. Many interviews consist exclusively of advanced/obscure technical questions.
- Smaller PEs are more fit-focused and try to determine your true motivation for moving into the industry. You should still expect case studies and modeling tests, though.
- For these modeling tests, learn how to build a simple LBO model quickly (30 minutes or less). Don’t know how to do this? Stay tuned for an upcoming product…
- For case studies, focus on simplicity and don’t try to come up with a really complex analysis. Being articulate is more important than being complicated.
- Anyone from a banking/PE background should know his/her transactions very well.
- Anyone coming from a non-traditional background needs to explain how he or she would fit into PE despite having no relevant experience – usually the best strategy is to focus on your operational experience and explain how you can pick up the finance side.
Big firms make decisions quickly and usually wrap up recruiting by April/May.
Smaller places prolong their decisions because 1) they can afford to be selective and 2) they are ultra-concerned with fit. I’ve heard accounts of candidates going through 5-10 rounds of interviews at smaller PE firms, and going to dinners, lunches, and other events before getting an offer (or a rejection…).
If you’re applying to a large firm but are not coming from a bulge bracket analyst background (e.g. you’re lateraling from another PE firm), the above does not apply and you may still go through many rounds of interviews spread over months.
Receiving an Offer
It’s almost impossible to receive multiple PE offers – typically, a firm only gives you an offer if you agree to accept it beforehand.
It’s not like the banking recruitment process where schools prevent firms from screwing people over – you’re not protected by an institution here, so the firms you’re interviewing with can do whatever they want.
At smaller firms there’s more room for negotiation on salary, bonuses, and other terms – but your negotiation power is directly proportional to your experience and what level you’re coming in at.
So if you’re going for PE right out of undergraduate, don’t think you can “negotiate” your way into a $500K base salary.
Living the Dream
Just remember everything here and you’ll be on your way to the promised land – or at least you’ll never have to do a pitch book again.