Just how important are modeling skills to getting a PE job? Specifically in the lower MM?

I just finished my first year at a top MM, pretty substantial deal experience, decent modeling experience, but not too much in terms of crazy LBO modeling. My question is the following:

Exactly how important are modeling skills for PE? Specifcally middle-market PE (think firms in the $300M - $800M range). I've got a fair amount of modeling experience, but I'm worried I won't be competitive due to a lack of LBO modeling skills.

However, I would think that substantial deal experience and general modeling abilities would help make up for that. Furthermore, I work in a specific, targeted industry group and intend on focusing on PE shops that have the same focus, so I assume that would help my chances as well.

Any input would be appreciated.

 
Best Response

I never interviewed with shops in that range but many of my co-workers did and my college roommate works at a regional 300mm shop. From their experiences, the modeling is even more important, especially if you are coming from a non-BB. Not fair, as experiences are often comparable. The problem is the bigger shops taking 5 to 6 associates per class tend to pick by deal experience and from the bigger banks, so they are relatively assured that the modeling skills are adequate. The smaller shops that only take 1 or 2 per class and have a much tighter knit environment need to make sure that their hires are competent enough to handle the demands (which may span much more beyond your typical associate role) and in alot of ways it's just as hard to land these positions due to the level of pickiness in fit and technical. Their candidates probably have a broader range of experiences (in terms of names of banks, groups, etc.) where as the bigger shops will cull the herd down to a specific type of candidate before they even begin their recruiting process.

Anyways, almost all the smaller shops had extremely rigourous processes with modeling tests or case studies, and extensive fit interviews.

 
GameTheory:
I never interviewed with shops in that range but many of my co-workers did and my college roommate works at a regional 300mm shop. From their experiences, the modeling is even more important, especially if you are coming from a non-BB. Not fair, as experiences are often comparable. The problem is the bigger shops taking 5 to 6 associates per class tend to pick by deal experience and from the bigger banks, so they are relatively assured that the modeling skills are adequate. The smaller shops that only take 1 or 2 per class and have a much tighter knit environment need to make sure that their hires are competent enough to handle the demands (which may span much more beyond your typical associate role) and in alot of ways it's just as hard to land these positions due to the level of pickiness in fit and technical. Their candidates probably have a broader range of experiences (in terms of names of banks, groups, etc.) where as the bigger shops will cull the herd down to a specific type of candidate before they even begin their recruiting process.

Anyways, almost all the smaller shops had extremely rigourous processes with modeling tests or case studies, and extensive fit interviews.

I interviewed with middle market firms in the range of $2-6 billion, as well as a couple of the large buyout shops. From my experience in the interviewing process and now working at one of the aforementioned firms, GameTheory is pretty much spot on. If you didn't work on LBO transactions and don't have the modeling experience from that, it's fine to say so if you're asked. However, since you are interviewing for PE, you owe it to yourself to learn how to build a basic lbo model so that you can articulate how certain mechanics might work or how changes in certain variables would affect your returns if you're asked in an interview. Also, you might be given a case study or a modeling test during your second round or later, so at that point you'll definitely have to execute. You're obviously not going to be expected to know as much as someone who had two years of experienced in leveraged finance, but it would be a mistake to think that you would get any sort of "free pass" in a private equity interview just because you didn't do leveraged buyouts. From a private equity interviewer's perspective, I would actually argue that since you didn't have experience doing LBO's (as was the case with myself), it's even more imperative that you can prove them that you know what the job is about and you can handle it. Take this stuff seriously and do what it takes to get up the curve quickly.

​* http://www.linkedin.com/in/numicareerconsulting
 

Thanks for the response, GT, I appreciate it.

As a follow-up question, I am curious as to what sort of modeling skills are expected? How advanced do they expect one to be? Examples would be helpful. I feel like I have decent modeling skills, but am not sure what exactly people expect.

Thanks in advance for any additional help.

 

If you've done 'modelling' in M&A but not touched on LBO modelling specifically, is this something you can pick up through independent study if trying to get into PE?

How helpful would it be to have someone in PE go over LBO modelling with you, like a tutorial??

tia

 

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