COVID-related questions in interviews
What kind of COVID related questions may come up in PE interviews this year (e.g. during on-cycle recruiting)?
Do you think the interview topics will be heavily influenced by COVID or would they be mostly as usual?
It might be hard to avoid Covid-19 related questions in interviews. It might make sense to be prepared to answer the following questions:
What effect do you think the government stimulus is going to have on the economy? What kind of an economic recovery are you expecting and why (V-shaped, protracted, etc)? What industries are likely to be permanently affected post-Covid (both positively and negatively)? Nobody knows a precise answer to these questions, so having a point of view and being able to substantiate it should be sufficient.
I would also ask the funds some questions about 1) how their operations fared during lockdown and having to work remotely; 2) how their portfolio companies were affected by Covid; and 3) whether or not they are changing their investment mandate in any way post-Covid.
Could you please provide brief answer ideas to these? thank you!!
Yes, sure.
1 and 2. What we saw pretty immediately was a powerful liquidity wave fuelled by government stimulus: as a result, public markets valuations have decoupled from the economic fundamentals. It is harder for private equity to compete for new deals at attractive entry valuations because of the elevated public multiples.
In terms of medium and long term economic effects, I recommend reading excellent analysis in some recent articles published by the Financial Times (European Edition):
"A return to 1970s stagflation is only a broken supply chain away" "Covid-19 recovery economics" "When will global employment recover from its coronavirus collapse?"
See a recent 54-page report by the World Economic Forum "Challenges and Opportunities in the Post-COVID-19 World" I recommend staying current on this topic by reading the business press daily, as things and opinions change rapidly as new evidence is emerging every day. "
I wouldn't be surprised if some firms ask questions about COVID-related liquidity management at portfolio companies. Many Associates have done reforecasts, helped with lender renegotiations and done scenario modeling/sensitivities for their portcos right now.
How would you think about modeling a COVID reforecast for company X? What are company X's liquidity / restructuring options given that COVID destroyed X% of their revenue / they may be in violation of a covenant soon? What industries would you invest in right after COVID / now, if any at all? Thinking about '08 Recession vs. COVID Recession (if there is one)?
I do not think interviews will be dominated by COVID questions. Most PE firms expect normalcy will return by the time you are an Associate if they are interviewing you right now.
What would your answer to the second one be? How would you expect to renegotatie structure of debt with violations of covenants
The banks are not enforcing on companies that already violated or are about to violate their covenants due to Covid. Everyone is reasonably understanding and there are many instances where payment holidays are in place. However, the banks want enhanced reporting from companies and a robust action plan.
Yes, sure.
1 and 2. What we saw pretty immediately was a powerful liquidity wave fuelled by government stimulus: as a result, public markets valuations have decoupled from the economic fundamentals. It is harder for private equity to compete for new deals at attractive entry valuations because of the elevated public multiples.
In terms of medium and long term economic effects, I recommend reading excellent analysis in some recent articles published by the Financial Times (European Edition):
"A return to 1970s stagflation is only a broken supply chain away" "Covid-19 recovery economics" "When will global employment recover from its coronavirus collapse?"
I recommend staying current on this topic by reading the business press daily, as things and opinions change rapidly as new evidence is emerging every day.
Just make sure you know the economy is going to have a V shaped recovery and you are SOLID
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