I am about 3 weeks removed from receiving three PE offers (from MFs and top MM firms), both elated and relieved to be done with such a crazy process. I saw that another user commented saying he’d do a write-up about his experience going through the recruiting process and figured I’d wait to write up mine until after, but I haven’t seen his so figured I’ll just go ahead with my post. This community was absolutely instrumental in helping secure the offers, so I think it’d be incredibly selfish to not give back and write about my experience.
To give you a little bit of background about me: 1st year analyst working at a mid-level BB in a mid-level coverage group. Top-25 (non-Ivy) school, solid GPA, didn’t summer in banking and recruited full-time.
I think this post is best served in 4 distinct parts:
1) initial headhunter meetings
2) preparation for the process,
3) coffee chats, dinners and the actual interview process, and
4) miscellaneous.
1) Initial Headhunter Meetings
Plain and simple, everything starts with the headhunters. They are the gatekeepers to basically every interview process and are incredibly important. If you work at a BB or an elite boutique, the headhunters will begin reaching out to you in October / November. You do not need to email them before you start working or anything like that – it’ll serve you no benefit and will only hurt you in the process. They’ll reach out to you. With that said, I have a funky email address that includes my middle initial, so when all of my peers received the messages from Dynamics/CPI/Amity/Glocap/etc., I did not. This sucks, but just have one of your coworkers forward you the email they received. It is perfectly fine if they haven’t emailed you, and I’m sure they’ll be more than happy to speak with you if you email them introducing yourself and asking to meet in person.
There are a few important points to note with these headhunter interviews. First and foremost, you only get one shot at meeting/impressing them and proving that you’ll be capable of going through PE/HF recruiting and being in front of their clients. Treat these initial interviews as you would any other important interview. I see people on here saying “ah yeah the headhunter meetings don’t matter much” – this is the wrong attitude. Unless you’re at BX/other top groups, you absolutely have to come off polished when you meet with them. I prepped for these meetings like I was prepping for a 1st round interview. They’ll ask you to walk them through your resume, what you’re looking for, why PE or why HF, where do you want to work, what kind of funds are you targeting, what are some names you’re targeting, things like that. One of the ways I think you can differentiate yourself here is knowing EXACTLY what you’re looking for. If you can name specific funds and why (e.g. is it their specific strategy? Is it because you worked on a deal with them? Do you know somebody there? Did somebody from your group go there? Is their head of C&R/Healthcare/Tech investing really well known? etc.), it’ll help you immensely. I think I got interviews at a few places because I specifically listed those firms as firms offering what I could consider a dream opportunity.
If you have a deal on your resume, expect for some of the headhunters that are former bankers (e.g. CPI, Glocap, HSP) to ask you to walk through the deal. I had kids in my group not prepare for these meetings and get sort of grilled (CPI did this) and not receive any interviews from that respective headhunter, while I received multiple interviews because I came prepared. You can’t come off wishy-washy here – you need to know that you’re either doing HF or PE, what size fund (i.e. middle market/large cap/MF/lower middle market/growth equity), where, and why. You can tell different recruiters different things (i.e. tell one you want PE, another you want HF), but unless you’re at a top group that consistently sends people to MFs/top HFs, then you need to know what you want.
Another thing I’d like to note is that, while the headhunters are the middle men in the process, you also play an important role and it is in their best interest to meet as many candidates as possible to try to place as many people as possible. That’s how they get paid. They understand that you’re a banker and there are a lot of demands on your time/life, so it is perfectly reasonable to wait to respond to their introductory emails several weeks (or months) later to make sure you’re ready. I waited until December to meet with the headhunters and I was fine. If you need to cancel and reschedule, that’s fine too so long as you do it professionally. If you know one week you’re going to be getting crushed and you have a headhunter meeting scheduled for 8:00am that Wednesday, email them and ask to reschedule; they understand. Just don’t do this several times.
Lastly, not all headhunters are created equally. Some of them, for whatever reason, just won’t click with you, which sucks but it is what it is. Some of them are just dicks and aren’t worth your time. I had a particularly awful meeting with one of the recruiters at SearchOne where the person essentially told me I was an idiot and I didn’t understand the size distinctions between PE firms. Jokes on them, I got 3 offers in PE despite “not knowing what it is”.
2) Preparation for the Process
It’s true that the interviewing process is grueling and seems to pop up out of nowhere every year. It catches people off-guard and I know quite a few people in my group felt underprepared for everything. Each year the process gets earlier and earlier, so it’s absolutely crucial that you’re ready for the process. This means prepping in your down time at work at any chance you get. That said, you have to be discreet about it. You don’t want to give off the impression that you’re only there to work for 6 months, get a PE/HF offer, then cruise for the next 18 months. Make a pitchbook with a generic cover and put a guide in it so it “looks” like you’re working, when in reality you’re studying. Read websites/articles about your deal and take notes. Read initiating coverage reports on the two companies involved in one of your deals, read comprehensive research reports on the sub industry that the companies are from, understand everything there is to know about the business models. Do practice lbo models in your free time. Even if you have a Saturday off, if you’re just gonna be lying in bed hungover, go into work and practice.
The Wall Street Oasis Private Equity Interview Course I think was probably the most important part of my prep process, but on its own, I’d say it’s incomplete. I think it’s the best one out there and 150% worth the investment (seriously, $300 price tag for a $200k+ job? Sign me up), but you need to supplement your preparation with other things as well. People on this site love to stress the importance of modeling, and I always see kids on here saying “oh that group doesn’t model, it’s not a good group” but that couldn’t be more misguided. I come from one of the groups that, according to people here, apparently “doesn’t model” (news to me lol). Every group models, and every group will have practice LBOs for you to get your feet wet with (…I hope). Sure, maybe some of the product groups get a more “technical” modeling experience but it’s not that important. In reality, the models in my PE interviews were not very difficult. One of the megafunds I interviewed with had a template-based cash sweep model and it was a joke. Another firm just had us do a debt paydown from scratch and it wasn’t very hard either.
This next paragraph will go against the conventional wisdom of this site a bit, and it’s my own personal opinion so take it with a grain of salt. I don’t claim that it’s the right view, but it’s my belief and it’s what I would do if I went through the recruiting process again:
The single most important part of your interviewing experience with PE firms will be your deal experience. I would say a solid 30% of every single interview I had was spent talking about my deal in depth. If you don’t have an announced M&A deal on your resume, or you don’t have an unannounced deal you feel comfortable talking about on a very granular level, I don’t see what you would talk about in your interviews. I was incredibly fortunate to have a $1-2bn sell-side on my resume that got announced two months before everything started (conveniently, right when I met with the headhunters). I think it was the single most important factor in me landing the interviews (and ultimately the jobs) that I received. If I hadn’t had an announced M&A deal on my resume, I likely would have waited until next year to go through the process. People here say it’s a detriment to your chances, but I met quite a few people throughout the process from BAML/JPM/GS that were second years going through the interview process for the first time. Perhaps there is a stigma against them, I’m not sure and I don’t know where they ended up, but there were a few second years at my interviews with 3 megafunds and 2 of the top MM firms. I understand the desire to get out of banking, and if your bank doesn’t have a 3-year model like the aforementioned banks, then maybe that won’t work for you, but my bank generally lets people stay on for a third year if you’re on good terms, so I probably would’ve waited an extra year had I not felt prepared. After all, you only have one shot interviewing with each firm so you can’t really screw it up.
In terms of preparation though, I don’t want to get to in depth because I think you should have to figure that out on your own, but I will say that the three biggest areas to focus on are first and foremost, the deals on your resume, secondly understanding everything there is to know about an LBO (on a theoretical and conceptual level), and third, being able to walk through paper lbos/case studies. In some of my interviews, we got REALLY granular into my deal experience, and it was good that I had prepped so thoroughly, so you have to know everything about them. The case study part caught me off guard and I think it might be the one area that the WSO guide didn’t exactly prepare me for, but a lot of my interviews had a case study where they wanted me to talk through how I would approach a potential PE investment so it was something I picked up throughout the process which was nice.
3) The Actual Interview Process
This is where things get really hectic. Everybody sort of knew interviews were coming towards the end of January. I had been contacted for coffee chats/dinners at several different firms in early January. These, I think, are mostly used to drum up interest and allow you to get a feel for some of the firms and the people that work there. While I think they’re a good indication of whether you’ll get an interview, I agree with the other poster who said that they’re not the end-all, be-all of the process. There were a few firms that I got coffee with an associate/VP and I thought it went great, and I didn’t hear back/get an interview. There were some firms where I thought the drinks went poorly and I received an interview. There were even more firms still that had dinners and coffee chats that I wasn’t invited to, and I received interviews (and an offer!) from them.
Anyway, the process kicked off on a Friday or something this year. I got the gobuyside email saying “The following firms have started their interview process” and I hadn’t heard a thing and I got nervous. But then, over the course of that weekend, I received probably 3 or 4 emails asking me if I would be available to interview with XYZ firm at 10am/1pm/5pm/etc. the following day. For some interviews, I would literally find out at 1 a.m. that they wanted to interview me at 9 a.m. the following morning. The good thing is that you can push back a little bit to see if there is any other availability (i.e. 12pm instead of 9a.m.), but know that things move REALLY quickly and it probably is in your best interest to accept the time they give you, if you’re available.
On one day, I had interviews with 3 or 4 firms, and got called back to two of them for things in the afternoon. I am lucky in that my group is receptive to recruiting, so I was able to ask my associates to cover for me, but some people might not be as fortunate. I met a few kids who said that their group doesn’t allow recruiting, and that they hadn’t been in the office all day and were dreading the lecture they’d get when they show up 5 hours late to work.
While it does suck that things move quickly, the good news is that you know where you stand pretty quickly as well. For the three interviews that I eventually converted to offers, I found out I got a second round interview right before I was leaving their. In terms of offers, I received them probably within 3-4 hours of leaving their offices.
This section is pretty short, but for some reason I'm blanking on what to write here, but feel free to ask me any questions about the actual interviews and I'm happy to answer them.
4) Miscellaneous
There were a few ideas I held about the whole PE recruiting process that I had read here that ended up not being 100% true, so hopefully I can shine some light on those. One thing that stuck out to me, and that I continued to believe all the way up until I received the offers, is that I’d be handicapped by my group. I feel stupid saying this now, but I was sort of led to believe that unless I was at GS/BX/MS I wouldn’t be getting looks from any of the top funds. This was wrong. All told, I interviewed with 3 megafunds and 4 top upper MM funds. I received three offers from those before I ended my process. Throughout that first week, I also received offers to interview at ~5 or so other really quality funds (think Welsh Carson, GTCR, Genstar, Vestar type firms) that I had to decline as I’d already accepted offers. Not to mention the 10+ interviews I got for some lower-MM funds. This is coming from a decent BB in a decent coverage group, not a top group.
People also try to make it out that it’s impossible to recruit for west coast opportunities from NYC. While I will be staying in NYC for my PE gig. I received interviews at several top funds on the West Coast and had all of my interviews in NYC. A lot of the top west coast funds will fly out to New York City to do their process. I had two final rounds in NYC for west coast shops. I think the important thing is that you have ties to the west coast. I am from just outside of San Francisco, so it was easy for me to say why I want to move to SF or LA. If you don’t have ties to the west coast, I wouldn’t expect to have as easy a time getting interviews there.
This post is long enough as it is so I will end it here, but feel free to ask any questions here and I will do my best to answer them.
Mod Note (Andy): Throwback Thursday - this was originally posted March 2015. Also make sure to see Northsider's response to this post in the comments or by clicking here
Darn, need another banana to edit my post.
Update from 2017...tons of cases now included in the PE interview course :-)
First of all congrats on your offers and thanks for doing this!
In hinsight, what would you have done differently? Preparing for the case studies, if so, how?
That's a little bit tougher for me to say because I think I did about as well as I could've hoped, but there were a few things where I felt I was more 'reactive' than 'proactive' I guess in preparation. Thankfully I was able to build off of those from my first two interviews (coincidentally, two of the three interviews where I didn't move past the first round).
As you mentioned, the case study parts caught me a bit off-guard just because I'd only really practiced one or two, and even then, the reason why I practiced them was for the sake of building the model. In my experience, you need to be able to work through a case study and come up with a compelling investment recommendation using the information available in the packet they give you. One of the MFs gave me a ~10 page packet with a bunch of graphs and a couple blurbs about a specific company, the industry it operated in, competitive dynamics, and industry outlook. You should be able to look at that and say, "A is a great business, it has B, C, D, E & F going for it and given my preliminary read through it seems like it'd make for a compelling investment. That said, X, Y and Z are things I'd want to diligence further before I'd actually make a bid for the company." Obviously with much more fleshed out reasons than that. For example, one of the case studies, I said "This telecommunications business looks great, it has a really strong growth profile, its revenues are growing at 6% a year, their EBITDA margins are incrementally improving, their business requires very little fixed costs, their FCF profile is very attractive, and these assumptions seem reasonable/conservative." And that was one of the points I raised among 5 or 6 other.
I guess the best way I'd recommend prepping for this is going through sell-side and buy-side CIMs that you've gotten from private equity firms looking to exit/buy into a business, and go through it thinking how a PE associate would. i.e. Does this business check all of the boxes of what makes a compelling PE investment? And work through it that way.
Which I guess leads me to my next point, where I felt I was weak on but was able to steadily improve as I moved throughout the process. And that's the whole "thinking like an investor" idea. Understanding what creates value in an LBO on more than a simple cursory level. You can't get by just saying that paying down debt increases equity returns. There are several levers you can pull - revenue growth, margin expansion, cash generation/deleveraging, and multiple expansion. Ok great, you listed those, now lets walk through why each one is important, which is most/least valuable, why that's the case, which you'd look for and why, etc. etc. They give you a company to review, so talk about it in terms of those ideas.
Lastly, I think coming off "rambly" is a huge mistake (if that makes sense). Don't talk for the sake of talking. Don't let your answers be long-winded. Answer things concisely, explain thing clearly, get your point across, and allow the interviewer to lead the conversation. Obviously don't be too brief, but if you're shooting blanks, answer what you know, and then say something like "I don't know if this is correct, but this is how I'm thinking about XYZ" and hopefully they can lead you in the right direction. Don't be afraid to say when you don't know something, but also don't BS your way through things where you have no idea what you're talking about, because it's plain to see. You can obviously make things up (e.g., on the deal I worked on, I had questions like "where does this company trade in its peer group, what was its multiple, what was the revenue CAGR of this division, etc." and you can make those answers up so long as it's not an insane number like 150% revenue CAGR and 200x multiple. The PE professionals likely don't know where the company was trading relative to its peers, so if it's 17.5x forward EPS, but you say it's 15 or 16x, that's fine).
Great post, the preponderance of which rings true from my experience. Having been through this process on both sides of the table now, I have a few reactions:
After interviewing dozens of candidates and debriefing with others on still more dozens, I can report that I've never once heard an interviewer credit a candidate for having completed a transaction. You're 7 months on the job: the lion's share of candidates (even from top groups) haven't had the opportunity to close a deal, and for many I interviewed, the deals they had announced weren't the ones in which they were most involved (due to double-staffing) or that were best to discuss in an interview setting. Literally the only time I heard deal experience mentioned by an interviewer was an occurrence in which a candidate had been staffed on a transaction involving one of our portfolio companies.
Not being long-winded can't be stressed enough. Most candidates for PE are near-professional status with respect to buzz word memorization. Nothing will derail your interview more than a palaverous answer. Keep it short, mention the most essential details and let the interviewer determine whether more investigation is necessary. If you don't understand the question, ask for clarification rather than pontificating and hoping to cover your bases.
I think the OP would be floored by the proportion of interviewees with significant mistakes on the model test. Even candidates who reported confidence at the beginning of the interview (I always ask how they felt about the model) often had calculation errors, errata on signs (please, please, please use negative presentation - it will save you from countless embarrassing gaffes), miscues on returns waterfalls and omissions or double-counts on their S&Us. Generally, if it was clear the candidate understood the concepts and was slipped up by time pressure, it wasn't a 'ding', but those who submitted a perfect model undoubtedly differentiated themselves.
Separately:
Although I agree with your outline and sentiment, your illustrative answer blunders into a category I would describe as "I can read numbers". If I give a candidate a case study that includes historical growth information, reporting that information back to me will score them no points. Quite the contrary, that kind of answer suggests to me that you aren't "thinking as an investor", as it were.
The most frequently attributed reason for snubbing a candidate is "P&L cathexis", if you will. For instance, when I ask candidates, "If you could only have one statistic to assess investment attractiveness, what would it be?" A plurality of banking analysts mention growth rate. Alternatively, if I present a simple comparison, "Company A with 15% EBITDA margins and Company B with 10% EBITDA margins, in which would you rather invest?" A frustrating portion of interviewees have a knee-jerk preference for Company A. In short, I would submit that the example answer you provided is negatively correlated with receiving an offer.
Now, obviously some candidates demonstrate their judgment when pushed further in the interview; clearly you gave plenty of satisfying answers, given your results. That said, I think the "top candidates" generally offer more thoughtful answers out-of-the-gate. For example (granting that I know nothing of the specifics in your telecom case study), "A telecom company growing at 6% organically with expanding EBITDA margins in a GDP-growth industry is clearly taking share and will likely trade at a steep multiple. However, its defensive end market exposure should mitigate cyclicality and provide juice on leverage. Given its strong cash flow conversion, even at market-clearing multiple the company should offer a solid pro forma FCF yield. And, if I think about what kind of businesses I would want to buy in this environment, I'd rather pay up for and hence over-equitize a business with defensive demand drivers that will have air-tight coverage if we hit a down-cycle during the hold. Couple that with an out-executing management team, we can probably accelerate share gains in a recession, use our high FCF yield to push out the exit a year or two without compromising IRR and grow into an exit multiple that still results in attractive returns."
That answer is a bit longer, but it sticks to the essential details, avoids rambling and demonstrates second-order investment judgment without requiring your interviewer to pressure test your thesis. The problem with your answer is that it makes no headway re: whether the business is an attractive investment. Strong growth, expanding margins, strong FCF conversion and reasonable projections are all nice in a vacuum, but some of the least attractive LBO candidates out there exhibit all four. If you're going to point to expanding margins, I'd prefer you frame it as a diligence point: "One thing that gives me pause is the rate of margin expansion on what should be a fairly variablized cost structure. Perhaps management is pushing through price increases with limited volume growth and is at risk of ceding share to lower-cost providers in the future or being unable to maintain its growth trajectory. Alternatively, perhaps this company has fat corporate overhead expenses and there's an opportunity for cost take-out to bump margins up to industry standard. Either way, it's a key point of diligence."
Lest I seem like I'm being unnecessarily critical, I want to reiterate that I found your post very informative and I agree with the majority of the advice you propose.
+1
Wtf is a "GDP-growth" industry? And who the fuck writes shits like this " However, its defensive end market exposure should mitigate cyclicality and provide juice on leverage."...
The question about 2 companies with different EBITDA margins is such a dick one... What's the poor kid on the receiving end supposed to say to satisfy you? Ask for more info? Act on it right away?
Thank you for detailing this process. One of the best posts I have read on this website.
My question comes in terms of location (as you mentioned how having ties to the West Coast enabled you to show why you would want to move out there). When speaking with Headhunters, would it be looked upon negatively to say that you are willing to go to multiple cities depending on the best opportunity? Say you are open to living in NYC/SF/Bos/Chi, would they look at you as someone who doesn't truly know what they want?
Great question. You can definitely express that you want to be in multiple cities, and it can completely be because you're looking for the best opportunity, I just don't think you should express it in exactly that manner.
For example, I said I was looking for large-cap opportunities in Los Angeles because I love the area, my sister went to school down there, I have family there, I'm hoping to end up on the west coast long-term etc., but the reality is that I just wanted to interview with Ares/Oaktree/Leonard Green. So I don't think you should say "I'm looking for the best opportunity, regardless of location", even though that's the reason why (it was mine too!) because that'll just show that you're not really as focused/might not have ties to these specific cities.
Instead, phrase it similarly to how I did. Your ties don't even have to be 100% legitimate or real. For example, when I was interviewing for my FT gig at my bank, I constantly got asked why I wanted to work in NYC over SF, where I'm from. My answer was that my dad is always out here for business (semi-true, he comes out once every two months and I get dinner with him), I have a lot of family out here (not true, I only have a great uncle/aunt who I haven't seen in a decade, but not false), and NYC is a great city for finance (true). I'm actually not the biggest NYC fan, but it has the best opportunities so you have to give reasons to people that seem legitimate.
In all of my headhunter meetings, I said I was location-agnostic, but would prefer to be in NYC/SF/LA/Chicago (in other words, all of the best cities for PE haha) because I had ties to each location. I wanted to interview in Chicago because of MDP/GTCR, but I didn't say that.
I don't know if I'm explaining this well or not, but I hope you get the point.
Don't think it came into play that much. Yes, GPA/SAT score/School will be used as a differentiating factor, but once you reach a certain threshold it doesn't matter much. Unless you're trying to get to a fund that seems to only hire HYPS kids (Berkshire comes to mind), I don't think it is that important provided you have a solid GPA (3.6+), solid test scores (2200+), or both.
With that said, there are kids in my group who had lower GPAs/SATs and got interviews at tippity-top funds. There are others who had great scores/GPAs and just didn't click with their headhunters or have the requisite experience, and they didn't get interviews. I know kids who went to UIUC or UCSB, had 3.5s, low SAT scores, average groups, and they interviewed with megafunds.
Solid insights.
I would add a few things.
On the headhunter point, OPs advice should only be taken on a case by case basis. When I was recruiting for PE, I got zero love from headhunters and my only in was going over their heads by networking my way into the interview process. I never heard from any of the headhunters and so I had to call/email headhunters to get on their radars. In some cases they just outright ignored my calls/emails, sometimes they took the calls/emails but didn't invite me in to meet, and a few times they invited me to come meet them but never put me into any processes. Any interview I got was by networking, so it was essentially someone at the PE firm emailing HSP/Amity/CPI etc, and saying "hey, put this guy on the interview roster"
So the "let them come to you" depends heavily on your background/firm/group.
Next, assuming you have a traditional background, OP is absolutely right about the headhunters making or breaking you. Be nice to them and take the interview with them seriously. I've met more than a few people coming from top groups on Wall Street that didn't get interviews at the usual suspects because they bungled their HH interview. Even if a PE guy sees a really impressive looking resume and asks the HH about him/her, if they bungled the HH interview the HH will shit on them and they won't get an interview. HHs are not incentivized to take a risk on a candidate.
Strongly agree that you should overkill interview prep. The entire process goes by in a instant flurry of activity and you only have one chance to lock-up an offer. You need to be bullet proof 1 or 2 months before you think you'll have to interview... because the only thing thats predictable about the PE recruiting timeline is that it will be unpredictable, often at your expense. I did ALOT of self-prep and then when I thought I was ready I did a 1-2 dozen mock interviews with friends and friends of friends who work in PE, and then calibrated my answers and delivery based on their feedback.
On modeling, I would say it is a stressful situation. So even if you're extremely comfortable modeling, do a bunch of timed, from scratch lbo models of random companies you don't know. If nothing else, you atleast get the muscle memory and layout of the model down to where you go into auto-pilot and don't have to think about the mechanics.