PE Recruiting Prep Guide - 2024

Background: I started writing this as a reply on another thread (“travel or prep on-cycle?”) but thought it would make more sense as a standalone post.  Some background: I am an AN2 at an EB in NYC leaving for PE at the end of this month. I secured an offer this past January; the advice/guidance below is informed by my experience preparing for the off-cycle PE recruiting process (mostly recruited September – January of my second year), but I think this structure would apply to the on-cycle process as well. I give this advice during phone calls with incoming analysts in their spring semesters but wanted to memorialize on WSO (partially out of my own laziness, so that I can just point folks here as a prep strategy primer) for folks to reference. I didn’t have a guide like this going into the process and coming from a non-target school that, while sending a good amount of folks to IB, doesn’t have a solid buyside population / support network built out yet, and I think I would have benefited tremendously from a framework like this. Without further ado:

In my view, there are 5 key components of a comprehensive prep strategy and mastery of all of them is critical to success in this process:

  1. Behavioral questions
    1. Similar to banking recruiting, you should be prepared to answer a wide range of behavioral questions. These questions can/will include:
      1. Tell me about yourself
      2. Why investing? Why PE? Why not HF/Venture/Growth? Why [specific PE sub-strategy]?
      3. Favorite/least favorite parts of banking? What worries you most about making the transition to PE?
      4. Why did you go to [university]? What was your favorite class in college?
      5. Etc.
    2. You are interviewing with investment professionals whose careers hinge on their ability to smell out BS (exaggeration) – it is crucial that you come off as believable in your responses (ideally you also believe what you are saying…)
    3. The most critical questions / answers in this bucket will be the “why PE” questions as they will be asked in almost every single interview
  2. Technical questions
    1. Similar to banking recruiting, you should be prepared to answer a wide range of technical questions. These questions can/will include:
      1. Walk me through how a $10 increase/decrease in depreciation flows through the three financial statements
      2. What is deferred revenue? How does a $10 increase/decrease in deferred revenue flow through the financial statements?
      3. How do you calculate DPO?
      4. Walk me from EBITDA to unlevered free cash flow
      5. Among others – if you are rusty on these concepts, I recommend leveraging the classic 400 Question Guide (or whatever you used to prep for the banking process) to refresh yourself
    2. You will also be asked a range of “pseudo-technical” questions – these aren’t textbook-style questions like the set above, but slightly “softer” questions to evaluate your critical thinking and investment acumen:
      1. What makes a good business to invest in?
      2. What’s in an EBITDA multiple?
      3. What are the three most important things to look at when evaluating a business?
      4. How would you decide what multiple to bid for a business?
      5. What’s your favorite business?
      6. What’s your favorite market?
      7. What’s your macro outlook?
      8. How would you evaluate the maximum level of leverage for an LBO?
    3. Of course, you should also be very comfortable doing a paper LBO
  3. Financial modeling
    1. You should be comfortable building a basic dynamic LBO model (like the popular “Version 1”) from a blank Excel in 1h – 1h15m to ensure a margin of safety in this recruiting process
    2. Ensure comfort with modeling concepts/functionality like purchase accounting, PIK, add-on acquisitions, dividend recaps, and upside/base/downside case toggles
  4. Investing acumen / case study skills
    1. A key part of most PE recruiting processes will be an investment case study, usually after a couple of technical / behavioral rounds. You will typically get 1-3h of individual preparation time, followed by a 1-2h debrief with members of the investment team where you will present your analysis and answer questions
    2. These cases vary in detail / difficulty; some firms may combine this part of the process with the modeling component mentioned above. You may have 3 hours to build a model for a business and use that to inform your investment thesis (in addition to qualitative factors)
    3. Going into these cases, it helps to have an investment framework developed to help structure your thinking and analysis. Some things you may want to look at when evaluating the investment (qualitatively):
      1.  TAM / End Markets
        1. Growing vs. taking share; cyclicality; fragmentation and penetration
      2. Quality of revenue
        1. Customer retention; price vs. volume-driven growth
      3. Margin resilience (competitive advantage)
        1. Barriers to entry; degree of pricing power; proprietary technology (lower production cost)
      4. Growth opportunities
        1. Consolidation through M&A; organic growth (new markets, new products, etc.)
      5. Other considerations
        1. Cash flow conversion, investment exit considerations, COVID bump / normalized earnings, source of growth (price, volume, M&A), recession resilience
    4. It also helps to have an idea of what you would present, if you are not given a template. Some things you may want to include in your presentation:
      1. Business overview
      2. Investment overview (thesis, risks) – what is your position? Do we invest at the given valuation? At what valuation would you invest?
      3. Management projections overview
      4. Valuation / financing
      5. Diligence questions
    5. A good way to practice this would be to give yourself a fixed amount of time to put together a model and memo for a random business. This can be a publicly traded company or you can use an old CIP.
  5. Discussing deal experience
    1. You will be expected to know the ins and outs of any deal that you have on your resume
    2. A good framework for 2-minute elevator pitch can be found on the website 10x EBITDA (article title: “How to Walk through a Deal in Private Equity Interviews (and HF)”)
    3. I recommend building an LBO from scratch for each deal on your resume. This will a) give you an additional modeling rep, b) allow you to speak to potential returns, leverage, upside/downside etc., and c) help you better internalize the financials (growth, margins, etc.)
    4. Some other questions that you may be asked:
      1. What are the primary growth drivers?
      2. Was this a good deal? What do returns look like? What about the downside case?
      3. What did leverage look like / what is an acceptable level of leverage? Why?
        1. There isn’t really a right answer to this; I prefer to look at (EBITDA – CapEx) / Cash Interest Expense and keep that under 2-3x but it’s more of an art than a science
      4. What was the end-market mix?
      5. How many employees did the business have?
      6. [Other business-specific questions]
      7. What are the public comps and what do they trade at?
      8. What are the key risks and merits?

Other miscellaneous tips / advice:

  • In terms of resources, my EB had a shared recruiting folder that was chock-full of resources; many of these were originals and a few were the standard WSO prep resources. Those can definitely help you build a solid base. For financial modeling, PF and Wall Street Prep have good examples / templates / prompts. For the investment / casing framework, I recommend leveraging a number of resources but also really trying to develop your own investor mindset that you think makes sense. The website 10x EBITDA is also quite good.
  • Understand that this is nothing like banking recruiting. Whereas previously you were competing against the “broader population” for many summer analyst spots, you are now competing against a much stronger pool of candidates for a smaller set of buyside seats. Each firm has far fewer seats per class vs. banking, so each hiring decision is far more weighty / risky from the firm’s perspective. The associate roles you are recruiting for are generally much more ‘advanced’ in terms of responsibility and importance on the team than the banking analyst role – expectations and ‘hiring threshold’ are much higher as a result.
  • Start preparing early, ideally in the spring semester of your senior year (before you hit the desk). You don’t want to be worrying about this after graduation, when you should ideally be traveling the world enjoying your last few months of “true freedom”.
  • Don’t underestimate how long this takes. It’s an incredible amount of effort to be “interview ready” in all 5 broad buckets I laid out above.
  • Mock interview with your peers. Although there is no substitute for real world reps in interview processes, you will benefit tremendously from speaking your answers out loud in a mock interview setting. I neglected to do this during my prep but probably would have gotten an offer much faster if I didn’t.
  • Seriously consider on-cycle recruiting. I won’t go into too much detail on this since a) I didn’t do it and b) it’s not the point of the guide, but I wish I had followed my own advice and prepared during my senior year and hit on-cycle strong (for reference, it kicked off during the ~last week of August / after Labor Day for my class). If you get an offer, it’s a free insurance policy: if you find you love banking (hate finance), then you can gun for the A2A offer (leave finance) and renege on the PE offer. If you realize that banking isn’t for you and you’d prefer to explore a career in private equity investing, then you already have an offer in hand and don’t have to sweat for your second year of banking. Of course, some folks may disagree with this (better to go slow, focus on succeeding as an analyst instead of recruiting, etc.) but I wanted to throw in my perspective (but, again, not the point of the post).

Happy to take any feedback from folks who have gone through the process as well as answer any questions in the comments if helpful

 

My first day is early July. I had planned to spend most of my free time after work/weekends in July and August preparing, focusing mostly on LBO practice and technical prep. since I don’t really have much modeling experience. Is this an acceptable timeline or will I be crunched for time? I didn’t really have time to prepare in my post grad months since I had firm pre-training work plus FINRA exams to study for.

 
Most Helpful

I was in the same boat when I started. Candidly, I wasn't disciplined so I was woefully unprepared for on-cycle even though I had "prepped" for ~2 months when it hit at the end of August (in reality it was equivalent to 1 week of what I would consider "real" prep). Be honest with yourself - it's going to be training time, the analysts in your class are going to be going out, you're going to want to enjoy your last bits of freedom, maybe you have to network / worry about group placement (I did at my EB). Then when you hit the desk you want to focus on making an excellent first impression etc. and not be distracted by actively prepping (vs. reviewing concepts and staying fresh, if you had fully prepared beforehand).

For you, the proposition is even more challenging. No one knows when on-cycle will kick off but based on how much it gets pushed back each year it wouldn't surprise me if it kicked off by the end of July. If you think you can commit yourself to prepping multiple hours a day (while being tired from training) and also dedicating serious time on the weekends to this, then you could be in good shape by the end of July. Don't underestimate the time commitment - and think of it as all or nothing. If you're going to half-ass the prep, then don't do on-cycle because it likely won't go well (and you won't capitalize on the value prop of on-cycle anyway, which is to stand out when the bar might be marginally lower vs. later on!). If you are serious about this, I would recommend starting now if you can, so that you guarantee yourself a month of prep and then can assess how much more prep you need once you start in July.

 

Thanks for the helpful reply. I’ll be heading to training soon, so I need to sit down and evaluate how much time I’ll have to prep (will have work for training plus studying for final FINRA exam). Candidly, I’m debating whether on-cycle is worth it. I’m worried it will impact my ability to make a good first impression my first month or so on the desk (let alone the fact that I have no idea if PE is even my goal).

 

This is very helpful, thank you.

Interested in hearing how recruiting was for 2nd year analysts. Are you leaving for a MF/UMM? What were the types of looks you were getting when you were recruiting during your 2nd year from Sep-Jan?

I'm a year below you so will be a 2nd year analyst in about a month. Have heard from peers that 2025 PE recruiting was quite slow over the past year due to fundraising and rate uncertainties, and that hiring might pick back up going into the 2nd year. Was that the case for your year? I'm at a top group at a top BB (MS/GS) and primarily targeting MF/UMM PE.

 

I'm going to be joining a PE co-investing group but was recruiting for both co-investing roles and MM/UMM buyout PE during my process (September - January of my second year). I made it pretty far in a number of these processes and was actively in a few when I got the offer from the place I ultimately ended up signing with. Why I chose co-investing vs. continuing to recruit for buyout is a story for another time. Here are the processes that I was involved in, roughly in chronological order from September - January (note that I was less prepared earlier on in my process, especially September / October and I completely whiffed the first round of a couple of these as a result): UMM buyout, MM buyout, MM buyout, SWF co-investing, family office type place growth, MM buyout, niche MM buyout, MM buyout, PE co-invest (signed). Around when I signed, I was about to enter the process at two UMM buyout firms but obviously pulled out.

I wrote all of that so that you could have all of the data - you will get good looks as a second year, but there was definitely a decline in 2024 opportunities over the course of my process (logically this makes sense). Anecdotally, I had a friend who started recruiting right as I signed (coming from a UMM PE analyst program) and they saw less opportunities and gained less traction in each, which I attribute to a general market slowdown and hiring caution. My #1 piece of advice would be to not delay starting this process. Especially in this market, you want to give yourself as much time as possible - off-cycle processes can be long and the firms can be quite picky. It sounds like you have a goal in mind - my recommendation would be to get yourself interview-ready and get the headhunter / interview generation machine operating ASAP to maximize your odds of success.

 

Incredibly helpful so thank you for writing this all out. How long did you spend prepping before you started taking interviews? Did most of the learning come from interview reps? In a very similar boat as a first year at an EB (honestly might be the same bank) and struggling to find the time to prep given the ridiculous hours we’re asked to work.

 

No problem, glad this was useful! I probably spent a ~month prepping while also getting crushed in August / September. I wasn't really that well prepared heading into those earlier processes and it showed as that's when I got dinged after just one round. After that (late September / early October), I really buckled down and was simultaneously expressing interest to opportunities (because there is a delay between you expressing interest and actually getting an interview, assuming you are even selected for one) and intensely preparing. It was an ongoing process and unfortunately a lot of the learning did come from real interview reps - ideally you can be more prepared and do mock interviews to avoid that (although you will always learn something from a real interview process). I did get noticeably better as I went through the processes and it showed in how far I was advancing in each one in December vs. September.

Regarding the time commitment, I totally understand where you are coming from. I don't know your exact situation but unless you are getting absolutely crushed (as in, working 7 days per week, logging off at 2am+ every night just to wake up drained the next day and do it all over again, for weeks at a time - I've been there), then you have free time to prepare. It's not going to be easy, because instead of just going to sleep on the nights where you can sign off at midnight, you will have to spend the next 2 hours of "free time" to crank a model, work on behavioral responses, work on deal responses, etc. Hell, towards the back half of my process, I was getting crushed on a deal with consistent 3am nights - I left the office with my associate one night at 5am and had a 3-hour in-person interview round the next afternoon (and I advanced to the next round after that - not to flex, just to show you that it is possible).

That's why I recommend doing all of this before you hit the desk lol, because it was a painful experience. At the end of the day, it will make you a stronger person - and if you want to get out of banking and get that next offer, this is what it's going to take.

 

Can you give a break down of what your prep looked like? How did you structure preparing for each of the above sections you mentioned. Did you spend a few hours on each per day or did you try to become perfect in one before moving on. Any insight is appreciated.

Realistically can you do this all in one month? If so, what would it take?

 

I'll let others chime in here as well because I didn't do the traditional on-cycle process, but my advice would be to only express interest in on-cycle if you're ready to go (see my comment about this being all-or-nothing). If you're ready, then you should be enthusiastically ready and come off as polished to the HHs - these are the kids they want to throw into the on-cycle process, because they believe they can crush it and secure an offer. Anything less than that, don't waffle - just be straight up and say you're sitting it out for a couple of months to prepare and figure out what you want to do. Just my 2c looking back, I didn't actually do this.

 

This was super helpful! Would you mind PMing me as I am interviewing for a co-investing role and had some questions

 

Thank you so much -- this is such a helpful guide. Thank you for contributing this to the community. I would love the chance to chat with you more about this and ask some questions -- can you PM me?

 

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