Interview Advice- Small PE firm
(Senior Chimp, 22
Points)
on 7/17/08 at 3:17pm
I have an upcoming 1st round interview for an analyst position with a small PE firm (<10 people). My current position is in tech. consulting. I am anticipating the why PE question. What other types of questions should I expect? I am assuming that fit will play a substantial role given the firms size. Should I expect any technicals?
Also, if anyone has any info on market rates (chicago area) for compensation that would be very helpful.
Thanks,
ya...they wont expect u to build an lbo model
more case study type questions. be able to relate your work/companies u consulted for to PE and the value add there..
just like in any interview.
Daniel Ocean, have you ever
Daniel Ocean, have you ever been to a PE interview before? Judging by your response, I would have to assume the answer is "no." Maybe they'll go lighter on the interviewee if they came from a non-finance background, but the firm is not all of a sudden going to change its wants and needs just to tailor the interview to the interviewee's strengths.
I would argue that small and mid-sized firms are more likely to test your basic knowledge of leveraged buyouts as compared with larger firms, which generally would have done their pre-screening as early as the resume review to see what type of financial background you've had. In fact, the fact that you are coming from a non-finance background behooves you even more to demonstrate that you know what you are talking about. If you say you want to do PE, you'd obviously have to be able to answer very basic questions relating to the three financial statements as well as your understanding of leverage. If I were interviewing someone and they had no idea how to run through some basic qualitative LBO questions, the interview would be over shortly thereafter.
As for LBO models, you won't see that in your first round; if anything, they might give you a case where you'll have a few days to prepare an analysis and a basic LBO model. As well, there were a couple of instances where I had a couple hours to put together an LBO model on the spot. They'll let you know ahead of time if you have to do stuff like this. You may not need to have known how to build an LBO model before since you don't come from a consulting background, but this is the backbone of PE and if you can't convey how LBO's work at least on a high-level, you are probably toast.
So...
I had an internship at a small PE shop in Washington DC.
Questions:
1. More strategy. While you'll be doing the modeling, that's the easy part. They want to know more about how you analyze a company (5 Forces is a good paradigm to start with) and how you look at an opportunity. As an analyst as a small firm, you're relied upon more to contribute to the few deals they do each year.
2. Brainteasers. I think this might have been unique for most buyout shops, but still. As always, they want your thought process and to know how able you are to come up with a reasonable answer for say, how many slices of pizza are consumed in America every year.
3. Finance questions: LBO is the obvious choice. But more important than the model, they want to know the intuition behind leveraging up a company, when things can go wrong, and the differences between putting cute things into a model and making assumptions, and how you test the validity of those assumptions and their likelihood of coming through ad hoc.
Good luck!
Thanks numi, alphaholic.
Thanks numi, alphaholic. Most of the above advice is very helpful. I feel confident in high-level strategy and LBO/investment theory type discussions. My primary concern is making sure my non-banking/accounting background doesn't knock me out of contention.
Well, they must think you
Well, they must think you have enough potential if they're giving you the interview. If you worry about your background knocking you out of contention, then you probably are not much of a contender to begin with, to be frank.
Just do your best in coming across as someone that's thoughtful and understands when/why leverage is used, and like Alphaholic said, show that you possess the intuition of an LBO investor and that you can articulate what traits make a particular business more suitable for a leveraged buyout, and what aspects of a company's financials or market opportunity might render it an unappealing investment. Your consulting background should teach you how to think about things like growth opportunities, competitive dynamics, market opportunity, supplier and customer concentration, and so forth -- these are ALL things that matter to a buyout investor in some way or another. It's up to you to decide how to prioritize them.
Again, the employer will determine whether you're a good fit. If they don't hire you, then you just weren't the right fit. But nobody can begrudge you for doing the best that you can do, so don't get too preoccupied with other people's expectations and focus on highlighting what *you* can bring to the table.
Coming from a banking
Coming from a banking background, most of my questions in PE interviews were related to deals I've closed. That said, I was very frequently given the following:
1 - Talk about an industry, any industry, and the investment dynamics and why it would be good/bad to make an investment in that industry.
2 - Take company XYZ, they provide services A,B, and C: What keeps me up at night? Give me a basic SWOT (they love the SWOT).
3 - I own company XYZ now, and I'm looking to purchase company ABC (both companies will be described in detail). What are some key things I should consider looking at to determine if this is a good add-on acquisition? How much would you pay?
4 - You have the opportunity to meet with the CEO of company XYZ and only have enough time to ask him two questions. What questions do you ask? (Note, this is an industry specific question, so there isn't a standard answer for this).
5 - Guy flipped over my resume and had me walk him through an LBO model. Then said if he was reviewing my LBO model, where would he attempt to poke holes in my assumptions?
Other misc. questions include:
Walk me through your resume.
What do you look for in a PE firm?
Why our firm?
What are your strengths/weaknesses?
What would your deal teams say about you if I were to call them up right now?
Where do you want to end up in 5 years?
How many hours a week do you currently work?
CompBanker
I heard: "Tell me how you
I heard: "Tell me how you make money in [industry]" for an industry I had worked in repeatedly. I was also asked to walk them through how I would think about some of the deals they looked at during the past year.
i had a PE interview but it
i had a PE interview but it was leaning more towards securitzation.
1st round
describe what i did at prior firm
why PE, what do u see yourself doing 5 years down the line
walk him thru DCF
explain wacc
CFA Level 1 ROE type questions
post 1st interview.
1. build a cash waterfall model
2. SAT scores
3. financial statement corrections
2nd interview
very general, very behavorial
(bombed it)
was asked 2 questions.
1. walk me thrun your resume
2. any questions
i did not sell myself....
and also a writing sample
and also a writing sample