Diligencing PE firms (before accepting offer)
Edited for the sake of not misguiding others looking for GOOD questions to answer at a PE interview. Read responses below on what not to ask and feel free to chime in w questions you think are worth an MD time.
Not to be rude but a lot of these sound randomly pulled from the internet / naive. It's okay to ask for another call to discuss a few finer points in a casual way (i.e. "how do you guys think about performance fee structure?" "have you ever used placement agents or do you do everything in-house?") but would strongly recommend against emailing them a laundry list of 10 random questions, most of which won't really impact your role.
For example -
What do you care about regional banks? That scandal was 6 months ago, regional banks are fine. Same with credit facilities - PE firms are not at risk of liquidity issues, they are capital-light by nature of the business model.
And some of these are just business points.. unless the fee structure is unique to the firm in some way and they use it as a differentiating point, it'll be within a normalized range and won't impact your day-to-day. Also not sure why the LPA is significant to you unless you are an attorney. These are all very standardized things. Returns are important and you should ask about those.
Lol no offense taken, and thanks for the candid response. I'm trying not to fall in past PE traps, and not sure how much experience you have on buyout firms, exposure to small banks can be limiting in terms of borrowing capacity (aside from and in addition to risks of bank collapses like we seen with SBV, signature). I'll take you up thou on trimming the laundry list… definitely most of these will be brought up in life convos.
Very experienced - the regional bank thing was maybe fair to ask on March 10th but it's not a concern these days. No PE firms are leveraging up at the corp level to the point this would impact their borrowings.
You only get X number of questions before you start annoying someone and the regional bank thing is so irrelevant it would annoy people in the industry.
tack on 20 more questions and just blast it to the 3 MDs. would be a great way to show that you're digging deep and really serious about the role
Place the questions in an excel tracker and assign responsibilities to specific MDs to show initiative
This is a great start but I would add a few more such as the below:
- Walk me through your fund administration processes and if outsourced, how you made your decision?
- What legal risks exist for the firm and can you introduce me to your entire compliance team?
- How the upcoming 2024 elections may impact the fund negatively?
- Same as above but discuss in detail (minimum 1,000 words) to me how you will deal with increasing regulation from the government on private equity and hedge fund vehicles?
- Why do people my age tend to neglect to invite me to social events?
- Describe in thorough detail why this role is important to the firm? Note to them that you know the answer but you need to make sure their answer near perfectly matches yours or you will NOT be taking the offer
These are great. Thx for sharing.
This person is kidding with these questions if it wasn't clear
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