How to prepare for a private equity secondaries or a private credit secondaries interview?

There seems to be very little info online about PE secondaries or Private Credit Secondaries. What types of technical questions should I prepare for? And is there a specific type of financial model I should know about?

 

Ah, diving into the world of Private Equity (PE) and Private Credit secondaries, are we? It's a niche but fascinating area within the finance sector. While the context provided doesn't specifically mention PE secondaries or Private Credit secondaries, we can draw some parallels and insights from the general preparation advice for PE and Private Credit interviews to help you gear up for your interview. Let's break it down:

Technical Questions Preparation

Based on the most helpful WSO content, for PE and Private Credit interviews in general, you should be well-versed in the following areas:

  • LBO Modeling: This is crucial for PE interviews and could also be relevant for secondaries, given the importance of understanding the value and potential of the investments being transferred. Make sure you're comfortable building an LBO model from scratch.
  • Deal Experience: Be prepared to discuss any deal experience you have, focusing on your role, the deal structure, and the outcome. For secondaries, understanding the nuances of why deals are being sold and bought in the secondary market could be a unique angle to prepare.
  • Case Studies: These could involve evaluating a potential investment, including due diligence and valuation. For secondaries, the case might involve assessing the valuation of existing investments and deciding on a buy/sell strategy.
  • Technical Questions: These could range from basic accounting and finance principles to more complex valuation techniques. Brush up on DCF, comparables, and precedent transactions. For secondaries, understanding how to value illiquid assets and the factors that affect their pricing in the secondary market is key.

Financial Modeling for Secondaries

  • LBO Models: As mentioned, LBO modeling is a staple in PE interviews. For secondaries, you might need to adjust or analyze existing LBO models to understand the potential return on a secondary investment.
  • Fund of Funds (FoF) Models: This could be relevant, especially for PE secondaries, as you might be dealing with portfolios of investments rather than individual companies.
  • Cash Flow Modeling: Understanding the cash flow profiles of investments and how they might change when transferred can be crucial for both PE and Private Credit secondaries.

Additional Tips

  • Understand the Secondaries Market: Have a solid grasp of the dynamics of the secondaries market, including the reasons for buying and selling, market trends, and key players.
  • Know Your Deals: If you have experience with secondaries, be ready to discuss these deals in detail, focusing on your analysis, decision-making process, and the outcomes.
  • Stay Current: The secondaries market can be influenced by broader economic and specific industry trends. Being knowledgeable about current events and how they might impact the secondaries market will show your depth of understanding.

While specific information on PE secondaries or Private Credit secondaries wasn't directly covered in the provided context, using the general preparation strategies for PE and Private Credit interviews as a foundation and tailoring your preparation towards the unique aspects of secondaries should put you in a strong position. Remember, the key is to demonstrate your analytical skills, understanding of financial modeling, and knowledge of the secondaries market. Good luck!

Sources: Private Equity Interview Questions - 13 Topics to Know, Private Equity Interview Questions - 13 Topics to Know, Private Credit Interview Advice, https://www.wallstreetoasis.com/forum/investment-banking/how-to-prepare-for-restructuring-technical-questions?customgpt=1, Typical PE Credit Interview Questions

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For PE Secondaries, on the technical front you should prepare in the same way you would prepare for a direct buyout PE role. You are likely to get similar technical questions and a standard LBO model or case study. You aren’t likely to be asked secondary-specific technicals, which can’t really be studied and wouldn’t be learned on the job in banking, and are much easier to quickly learn on the job compared to the hard modeling skills and LBO knowledge you would be asked to show in the interview process.

On the behavioral side, have a solid answer for why secondaries compared to a standard PE role. Could be about why the day-to-day is a good fit, interest in the product, etc. Historically, secondary groups didn’t have enormous expectations of banking candidates knowing much about secondaries, but as the market has exploded and become more known as an exit opp to IB analysts, candidates have gradually been, on average, more knowledgeable about the space during their interviews.

 

Appreciate the color. I proceeded to the next round which will be a case study on private credit secondaries. Any chance you know what one could expect in a case study for private credit secondaries investment? 

 

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