A Guide on How to Navigate On-Cycle PE Recruiting
I thought I could finally give back to the community and assemble some advice for those thinking about going through the gauntlet of on-cycle PE recruiting. This is an amalgamation of comments I've made, discussions I've privately had with other members of this board, and some new thoughts. Hopefully, this is helpful and insightful and helps at least one person get an offer or make go/no-go decision on whether to participate in this shit show of a process.
PE recruiting (both on-cycle and off-cycle) makes IB recruiting look about as difficult as getting a greeter job a Walmart when you're geriatric.
Focus 100% on what you can control, and don't worry about what you can no longer control. In other words, don't spend time focusing on your GPA, what undergrad you went to, previous test scores, bank/group, etc. as all of those are now set in stone. They do play a factor in the process as I mentioned in the thread but there's nothing you can do to change those now.
If you are a first or second-year analyst thinking about going through on-cycle this year, the time to start preparing is now given how early the process is and the competitive dynamics. But you need to be 100% committed to the process and know for sure this is what you want to do.
The Headhunter Process
Step 1 of PE recruiting is being ready to crush your HH meetings. This involves having a well thought out and well-articulated story as to who you are, how you got where you are, and specifically what it is you want to do next, and why. It definitely helps to tell the HHs exactly what type of fund/strategy, in which geography, and what sector (or generalist if that's your thing) you want to be in and why. The more concrete you are, the more they will be willing to help you. The more articulate about the differences in fund strategies (and the more articulate you can be about describing WHY you want to work at a particular fund given their strategy), the better. HHs will ask you point-blank what funds you are most interested in. There is a great opportunity to illustrate and prove to them that you've done your homework on various funds, understand their nuances, and that KKR operates differently from Warburg (just an example), and get them to view you favorably.
It also helps to know who each HH's clients are and name specific funds you are interested in that they cover and be able to speak to why you'd be a good fit for said fund. The less wishy-washy you are on what you want the better. The HHs are very risk-averse as they want to get paid. Ask the analyst class ahead of you for HH coverage sheets. It's helpful to get those ahead of your first HH meetings (they tend to give them out at the end of the meeting but as I alluded to you really want to be one step ahead here).
HHs force rank candidates for each fund individually; while the ranking is similar, each fund receives a unique list with differentiation in rank often being whether you'd be a good fit/understand the fund's strategy) (the score/ranking consists of a host of factors; this is one). All that said this is a fast process and it's really only enough to get you the interview at these funds. Funds will also ask HHs directly, "How likely is Candidate X to accept our offer?" and you give the HHs more confidence to say "well Candidate X was very vocal about strongly preferring your fund strategy vs. Fund Ys, so I think he'd accept." This last point is more applicable to off-cycle given the speed of on-cycle, but it still applies.
Rank and triage which funds are your top choices and why. This will come into play during the actual weekend, as you'll come to see why in a later section below.
Remember above all else that HHs are NOT your friends. They work for the PE funds, not for you.
Modeling Exam & General Interview Preparation
Make sure you can absolutely nail modeling tests in less than the required time. This simply means you need to be getting reps. Your group/previous analyst class should hopefully have a bunch of old case studies/modeling exams you can use and practice. This is somewhat why bank/group can be correlated with exits, as this pool of resources and knowledge can build up over time within a given group. You should be working on them for 6+ hours at least on your protected Saturdays and studying late at night after you finish your work for the first few months. Ask yourself if that is what you want to spend that time doing because that is what it takes to increase your odds of getting a job. When it's time to take the exam, you should be at the point where you can do these models with your eyes closed and on zero rest. It should absolutely be 100% mindless mechanical excel work, and hopefully, it should be ingrained in muscle memory. Needless to say, you should be doing these completely error-free within two weeks of the process kicking off.
The people who are most successful in this process are the ones who put in the time and effort to be most prepared in order to skew the odds ever so slightly more in their favor. The modeling exams/case studies are a box to tick, but a very important one, especially given how fast and competitive the process is. It is 100% true that people get cut over seemingly minute differences in the quality of their model. If you finish with an extra 5 minutes and can spend that time both checking and formatting the model, that can go a long way to getting you to the next round. This also goes to what I have commented before about self-selection being a factor, as candidates who are more on the "hardo" side are likely to have somewhat pushed themselves/selected themselves into better groups, spent more time prepping for PE recruiting, etc. Of course, there are people who put minimal effort into preparing for on-cycle recruiting and will somehow get an offer from Thoma Bravo or something but don't think about them, worry about yourself, and again focus on what you can control.
Make sure your resume is polished and that you can speak in-depth to every single word on there. Make sure you have refreshed and polished your behaviorals from when you went through IB recruiting. Spend time practicing these out loud. Do some mock interviews with other analysts who intend to participate on the process and give each other objective feedback on each other's answers.
Tips on Developing the "Investor Mindset"
This part has been covered numerous times on this board by members who are significantly better and more experienced investors than me, but I'll lightly touch on it here for completeness.
Gently start to ask your senior bankers the "why" of the deal, from the buyer's perspective. Do try to think of it on your own, but it is helpful to get some insight with someone who is a bit more seasoned. When you do this be sure to practice situational awareness: don't do this as they're giving you comments in their office. Instead, ask them to grab a coffee and catch up, say you want to get to know them more and that you're working on XYZ deal for them, and then broach the subject. This has the added benefit of helping you develop a better rapport with seniors as well.
Second, and I know this is challenging in IB, but it helps to have skin in the game. You obviously can't actively invest and trade due to compliance restrictions, but you can run a paper mock portfolio on ThinkorSwim or Investopedia. Set one up, try to do some research on individual names/themes/ideas and build a portfolio and actively manage it.
Most importantly, read read read read read. Read everything possible. But, and this is absolutely critical, read actively and critically. Read all the classic investing books (there are plenty of lists on this site already so I won't repeat them). Read the WSJ/FT/Barron's daily. Read sell-side research on companies in the industries you're most interested in daily. As you're reading, ask yourself why this matters, what is the sell-side missing, how could this piece of seemingly unrelated news possibly impact the companies I cover/am invested in/my clients? Figure out what the most important KPIs are for the company and industry. How are they trending for the company vs. peers, how are they expected to trend over the next 1, 2, 5, 10 years vs, peers and why? What is the story? Is there a catalyst that could accelerate/decelerate the growth in these metrics for this company? Ask yourself to form an objective opinion on whether or not a given asset is mispriced or not. Valuation should be one of the final steps after you've gathered enough information on the industry and asset itself. Is it currently mispriced? Is there a reason it's trading at a 2.0x premium/discount multiple to peers? Is there a catalyst for multiple expansion/contraction in the near or medium-term? What are the risks to your thesis? Why could you be wrong? What happens if you are wrong?
Also, your ideas need to be actionable, and if you're pitching a stock/LBO candidate, it needs to be actionable for the specific fund you are interviewing at and it needs to align with their mandate and investment philosophy.
I know there's a lot here, but the goal should be to develop a systematic screening and investment process, and that takes a lot of time and learning by doing. It's something nobody ever truly masters and investing mastery is by definition an ineffable goal, but one everyone on the buy-side actively works toward.
Discussing Your (Minimal to Non-Existent) Deal Experience
Given how early the process is, everyone on the other side of the table knows how little real work you've done and how little knowledge you've accumulated. However, you still need to be extra crisp on what little deal experience (and pitch experience) you have. So the onus is on you to spin it to sound like you did more than you have, while at the same time walking the fine line of not going overboard in that direction. You need to know the major details of your deals (size, multiples, valuation, key diligence findings, etc.) and you need to be able to speak to whether this is a good deal for the buyer and why or why not. Note I said for the buyer, not for your client. So if you are on a sell-side, you should be explaining your deal from the buyer's perspective as they are the ones in the investing role. Take a formulaic approach to your answers about your deals. It's also helpful to explain upfront why you think this is a good/bad deal without being prompted (see the previous point on how to develop the investor mindset). All that said, please try to be concise. No more than 2 minutes when walking through your deals; better to keep it high level while hitting the major points and let the interviewer ask you follow up questions.
Pre-Process Breakfasts & Events
There will be breakfasts, dinners, networking sessions etc. before the process actually kicks off. But given how abruptly the process kicks off now and how early it is, these are becoming substantially less important in the overall process. Last two years, a number of these events ended up being cancelled because the process ended up launching before they even took place. That said I'd be remiss if I didn't meniton them in this thread. However, don't get upset if you don't get invited to a certain fund's event even if that is a fund you want to work at. I've personally witnessed people who weren't invited to these types of events for a certain fund end up getting an offer at that same fund. That said if you go, it's really simple: don't make a fool of yourself. Be courteous to everyone you meet and play the game.
The 72-Hour Living Nightmare
So the weekend is finally here. The process has historically kicked off with a particular SF-based PE fund jumping on a plane to Teterboro and kicking off the process. Every other fund and HH scramble to send out interviews once they catch wind of this. Sometimes those of us at other funds will hear rumblings this it's about to kick off, but even then it's like 5 days in advance max and we struggle to get ourselves in order, line up case studies, etc. It's definitely worse as a candidate, but it certainly isn't fun for the funds either.
The next few days will be an absolute abomination, and you will be interviewing on close to zero sleep and likely pissing off all your deal teams in hopes of securing your next job 20 months in advance. You very well be interviewing with a particular fund until 2am, then they expect you to come back at 7am to continue, all the while you are passing up interview offers with other funds.
You have to decide which funds you want to interview at amongst the choices you are given. Sometimes it even may be worth it to leave a fund in the middle of your interview process to head to a different fund you may have a better shot at. The funds will literally hold you hostage - you can spend 12 hours at a fund, get to the final round, then get cut and have no offer, while also having skipped out on a handful of interviews at other funds. I've commented on this before, but it helps to be aware of how funds make day-of decisions. I.e., KKR is notoriously prestige and "strength on paper" driven. So for example, if you are interviewing at KKR but have a mediocre background on paper (i.e., semi target undergrad, mid-level bank, not a 1600 SAT) and have another interview coming up at a different fund, it is likely in your best interest to leave KKR and head to that other fund. It's all about increasing your odds of getting an offer.
The interviews themself will run the complete gamut. You need to be prepared for anything and everything. Complex and nuanced technical topics, your story, deal experience, every single word on your resume, etc. You will be meeting with everyone from associates up to partner (although partner interviews are typically reserved for later rounds).
If you make it past the final round and are given an offer, you need to take it. These offers typically explode on the spot. If you leave the room, the offer is gone. No time to think it over, no time to shop it. This is why you need to know ahead of time what your top choices are in order and why. You need to be committed and willing to sign before you ever step foot in the room.
It is really impossible to overstate how competitive and fast this process is, and how much luck plays a factor. This is why it's not super wise (in my opinion) to draw broad conclusions about certain exit ops of a particular group/bank; that's not to say there is a zero correlation between the strength of bank/group and (this board's perceived) strength of exit, but the correlation is definitely not even close to 1, and I think it has more to do with preparedness, prior self-selection, and of course the aforementioned luck factor.
So the weekend is over and you have an offer - or maybe you don't. For those of you who received an offer, congratulations - you've secured your next gig. For those of you who didn't receive an offer, congratulations - you have more time to decide if this is really what you want to do and to potentially land somewhere that could be a better fit for you.
Remember how much luck plays a factor here. On-cycle PE recruiting is the finance hunger games. It is totally fine to recruit on-cycle and not get any offers. Do not beat yourself up over it if it doesn't work out, as it may end up being for the best. At the end of the day, it is just a job, and there will be plenty of high-quality PE funds recruiting later. You are also so early in your IB stint when on-cycle happens that you likely won't even know whether deal-driven work is for you or not. That's one reason why these funds go so early: to lock kids in before they become jaded in banking and decide to try something lower stress. Go read the horror stories in the recent threads on Apollo. While Apollo is definitely toward the top of the "most brutal PE sweatshops" list, it is certainly not playing in a league of one. There are plenty of people who burn out from Ares, KKR, Warburg, etc. early on after having already had a rough go in IB for two years. I have personally seen it happen to friends & former colleagues. A lot of my friends at MFs work harder now than they ever did in banking; the stakes are much higher and the pressure is more serious. I'm not saying this to dissuade anyone from doing MF PE, but more to make people aware of what they're signing up for so they can go into the process with eyes open slightly wider.
Good luck everyone!