Have an Interview at a Small PE Firm as a Freshmen (Looking for Advice)
Hi everyone,
I've managed to get one interview at a small PE firm which should happen in the next week or so. As far as I know they don't really expect me to know anything, and because of that the interview should be behavioural. However, this is my first ever interview so I don't exactly know what things I should mention, or really pay attention to. I'd love your advice and comments.
In addition, what could I do to actually do some work IF I do get a position? I want to have something to write on my resume and actually learn things apart from doing legwork (which is what I expect to do for the most part given my lack of experience). What skills/fundamentals are there that I should learn beforehand? I know financial accounting and the 3 statements. I don't exactly know modeling or DCF, but how long would it take for me to learn about that? Their work is mostly remote due to covid, so I think I should definitely show some competency to be able to get more involved!
Thank you everyone
Kouhwaii, bummer your thread hasn't had a response yet. Maybe one of these threads could point you in the right direction:
More suggestions...
I hope those threads give you a bit more insight.
does this PE firm focus on a specific industry or strategy?
Yes, so the interview was a failure because the MD had 0 intention to have me as an intern anyway. Thank you for the response though I really appreciate it, the firm was basically working with middle market companies that had begun to go under from my understanding after looking at their portfolio.
1. Be able to articulate your interest in PE, and that firm in specific.
2. Learn some basic DCF skills, and be at the point where you can at least verbally explain the logic behind a DCF (project cash flows and terminal value, discount it back to the present using WACC). If you understand financial accounting, you should be able to figure out how a mediocre DCF works within like an hour.
3. Learn the basic logic behind LBOs (similar to mortgages in the sense that you use debt to buy a company, and use the company's cash flows to pay down debt). Have an understanding of how increased leverage amplifies returns (it doesn't actually increase returns - it just amplifies potential gains or losses, so increases risk and reward in a way).
4. Understand how comparables and precedents work, in addition to valuation multiples. Should be fairly easy to search up and understand. As for valuation multiples, look into both EV/EBITDA and EV/Revenue just in case.
No one's gonna expect you to build a full blown DCF or LBO as a freshman. However, you should still understand the logic behind the two firmly. Your interview will most likely just be verbal, with lots of behavioural components.
As for the actual work you'll be doing, it's most likely going to be lots of sourcing (i.e. pull up a list of 20 potential targets every week). You'll probably get some exposure to spreading comps or working with precedents too.
Hi, thank you for the detailed response! Unfortunately the MD just called me to give some advice which I mostly disagreed with. He told me that I should start working from the ground up, work at corporate companies accounting departments etc then make my way up there throughout the years then maybe I could consider PE/IB. I do see his point but yeah I completely had to listen him for 15 minutes talking about that and he got off to me as an egoist prick, which I understand given that he had to work years for his position. He also said that I wouldn't be able to understand comparables etc whatever whenever they talked about it. He could've just said we don't have an available position for you, but yep. Rant off!
I'm not hopeful about getting a summer internship where I live right now but I'm still looking around. I wanted to ask how I should market myself going forward. A VP from a company has suggested I write to his friend at a boutique IB, so I want to market myself as someone who would be useful to them instead of wasting their time and resources. I mean I'm completely okay with doing grunt work as long as I get some exposure to the type of work they do, but I don't know if that's something you would say in an email lol. I also understand the basic logic behind DCF and LBO's. I'm currently going through the WSP course and have completed the Financial Statement Modeling part (albeit have not have made a model myself thus far) and now will move on to DCF. Then I'm thinking about making a model of my own from scratch just to get a hang of Excel and get familiar with everything (since laying back and watching won't teach me much imo) I wanted to ask your advice about how I should approach this because I think a referral like this will probably give me the highest chance instead of cold emailing, and I don't want to waste it!
Thank you so much again! I really appreciate your advice.
It really depends on the person. Many of these MDs (including one former MD I know) started out in FP&A style roles, then did their MBA before getting into banking and eventually PE. As such, the MD you talked to seems a bit tone deaf regarding the way things have been changing - everything is moving up in terms of timelines.
It's definitely a hit or miss thing, man. Thanks to the proliferation of information regarding finance on the internet, it is possible for even freshmen to have a pretty decent understanding of many concepts, but it is hard to get yourself taken seriously by higher-ups that started their career in a time when you could have never heard of banking until fourth year, and then still get a role full-time. I'd say keep networking, cast your net wide, try to build connections on a more personal level with people, and follow up with anyone who was very receptive while talking with you. You want to come across as genuinely curious about their work, and try to absorb everything they tell you. Then, you can use that information to come across as more knowledgeable in your next coffee chats, and eventually, you may find someone willing to give you a shot. For example, if you had a call with a guy in PE who talked about, say, covenant erosion in LBO debt, you might find a way to bring that up in a call with another PE guy, which would establish that you know enough about the world of finance to have heard about cov-light loans.
I know I kind of went off on a tangent, but to put it a bit more succinctly: the MD did seem a bit out of tune, but I'd say you should work on absorbing as much knowledge as possible, because someone in the industry can probably realize within a few minutes if you know what you're talking about or not. Even if you don't get a Summer internship right now, the connections you start building now could come in useful next summer.
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