12/13/10

I'm having the first one soon w/ a PE shop.

Any thoughts and insights you could provide for?

Questions to Ask at the End of a PE Interview

Just like any interview, private equity interviews will likely end with the interviewer offering you the chance to ask questions about the company and it is critical to have good questions prepared. Going into the interview - you should already have an understanding of the industry that the firm / group is focused on and have an idea of the usual "check size." So you should instead focus on asking questions about the firm's culture and investing style.

@CaptK shared:

Here are a few other questions you can ask to both feel out the firm and give them the idea you know what you're looking for in an employer:

  1. Ask about time split between portfolio company analysis/operations and evaluation of new investment opportunities. Some firms "buy and forget", while others are much more active managers and might send you out for a few days with the company several times a quarter. Get an idea of which type of place you're interviewing with.
  2. Ask what specific types of deals they're seeing lately and if there are any interesting trends in their industry niche. For example, I know consumer shops are seeing a ton of "bar" companies right now (nut/granola/protein) - people are split as to whether they're a new wave in consumption or just a fad.
  3. Ask about career track. Is it a 2 year program followed by business school? Is there an option for direct promote to a partner track position without an MBA? If their associates have done both, which is the more typical path? Important to know as you consider your career prospects.

@wookie102 shared some additional questions:

  1. How are deals typically staffed?
  2. Walk through the existing funds - what kind of MOIC/IRR for each? If you get an offer, ask for their valuation material or a summary of their portfolio, valuation marks, etc... Are you a more senior recruit? As for the PPM and or even a list of the LPs
  3. How invested is the current fund? How much dry powder? How is the fund raising process coordinated? What's your next target fund size?
  4. Who are the LPs, predominantly pension funds? Endowments? FOF? (Look for diversity and some strong anchor names). Is the GP 100% owned by the partners? (many MM funds have legacy GP interests held by funds that seeded them)
  5. Do you have operating advisors?
  6. Describe the committee process. Do associates participate? Memos? Presentations?
  7. Is there co-invest? Yes? Any levered co-invest?
  8. How do you source deals?
  9. How do you feel about investing in the current macro? Recognizing there is a pressure to put money to work in the 5 year PE cycle, what industries or strategies do you think make the most sense right now?
  10. Do you like your job? How would you describe the firm's culture?

As a general matter, you should know key portfolio companies, the firm's core industries / strategies and memorize everyone's name. See who is on the boards of which portfolio companies. Then be prepared to ask them about their deals and how they plan to exit. PE guys/gals love talking about their deals.


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Comments (22)

Best Response
12/13/10

I think the best questions you can ask are those that drive at the firm's culture and investing philosophy, because that's what differs between firms. Obviously you should already know that, for example, they focus on buyouts in the consumer brands industry and write equity checks of ~$50mm. Here are a few other questions you can ask to both feel out the firm and give them the idea you know what you're looking for in an employer:

1.) Ask about time split between portfolio company analysis/operations and evaluation of new investment opportunities. Some firms "buy and forget", while others are much more active managers and might send you out for a few days with the company several times a quarter. Get an idea of which type of place you're interviewing with.
2.) Ask what specific types of deals they're seeing lately and if there are any interesting trends in their industry niche. For example, I know consumer shops are seeing a ton of "bar" companies right now (nut/granola/protein) - people are split as to whether they're a new wave in consumption or just a fad.
3.) Ask about career track. Is it a 2 year program followed by business school? Is there an option for direct promote to a partner track position without an MBA? If their associates have done both, which is the more typical path? Important to know as you consider your career prospects.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

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12/13/10

Thanks for the insights, CaptK. These are very helpful. It looks like the fund I'm looking for has an equity check size of $10 - $35mm. A bit afraid if this means anything the compensation wide.

Any additional inputs you can provide?

12/13/10
ImPossible:

Thanks for the insights, CaptK. These are very helpful. It looks like the fund I'm looking for has an equity check size of $10 - $35mm. A bit afraid if this means anything the compensation wide.

Any additional inputs you can provide?

Equity checks in that range probably imply a fund size of around $250mm, which puts you squarely in the middle market (a great place to be for work/life balance and a strong experience). Huge caveat that it will obviously vary widely by firm, location, deal environment, focus, and your favorite color, but your comp at a fund that size will likely be in the low to mid $100s.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

12/13/10

+1 Capt K.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."

12/13/10

Yup. You've got the right point both on the fund size and total comp size. That was approx. the range I had in my mind as well. Do you mind quickly elaborating how that compares to upper middle market funds and large funds (not mega funds) assuming you have the info off the top of your head?

And also I'm not sure if an analyst at BB ever joins this fund size (~$250mm) given the total comp may even be less ($150k vs. $170k - $180K) It all comes down to the fit at the end, but just wondering.

1/25/15
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1/25/15

The main issues that PE shops are now facing pertain to liquidity and an inability to obtain financing (under accetpable terms). I work at a PE group that focuses on real estate/retail and we acquired a company last winter using ABL and CMBS debt with 90% LTV (that type of coverage ratio is unheard of these days). This obviously has a huge impact on IRR because more equity and less debt is used (less leverage) so I would ask how they intend to get deals done considering the current market conditions and how it will affect their investment strategy.

Good luck.

1/25/15

"When do I start?"

make it hard to spot the general by working like a soldier

1/25/15

What's their investment strategy? Pure lbo's, special situations, growth, majority/minority? And industry specific? You should be able to find this out on their website. That'll tailor your questions to be specific and not just something like "what's your strategy?" And MM is a pretty broad term. What's their typical equity investment and their target EV's?

1/25/15

Thanks so much, Dingdong. I will look into these questions and tailor my questions accordingly.

1/25/15

ToDie4WallStreet:

Thanks so much, Dingdong. I will look into these questions and tailor my questions accordingly.

If you post the answers to those questions and give a few more specifics (without giving away the actual fund) I'll help you formulate some questions.

1/25/15

Generic questions you should ask either way (in no particular order)

How are deals typically staffed?

Walk through the existing funds - what kind of MOIC/IRR for each? If you get an offer, ask for their valuation material or a summary of their portfolio, valuation marks, etc... Are you a more senior recruit? As for the PPM and or even a list of the LPs

How invested is the current fund? How much dry powder? How is the fund raising process coordinated? What's your next target fund size?

Who are the LPs, predominantly pension funds? Endowments? FOF? (Look for diversity and some strong anchor names). Is the GP 100% owned by the partners? (many MM funds have legacy GP interests held by funds that seeded them)

Do you have operating advisors?

Describe the committee process. Do associates participate? Memos? Presentations?

Is there co-invest? Yes? Any levered co-invest?

How do you source deals?

What are the firm's thoughts on B school? Direct promote ever?

How do you feel about investing in the current macro? Recognizing there is a pressure to put money to work in the 5 year PE cycle, what industries or strategies do you think make the most sense right now?

Do you like your job? How would you describe the firm's culture?

How is the wireless / cellular service in the bathroom? (Just kidding)

As a general matter, you should know key portfolio companies, the firm's core industries / strategies and memorize everyone's name. see who is on the boards of which portfolio companies. Then be prepared to ask them about their deals and how they plan to exit. PE guys/gals love talking about their deals.

1/25/15

Thank you so much wookie. Much appreciated!

1/25/15

Congrats on solid networking so early. Keep up this hustle and you'll for sure land a solid IB or PE gig when the time comes. To be fair, you haven't started college so I can't imagine they would have high expectations from a conversation with you. The major positive here is that they're giving you time out their busy day, which says positive things about their culture. If I were you, I would focus most questions on the career path for getting in their seat. Ask them to think back on their college years and explain what they might do differently, if anything. Do not mention the whole "I go to a non-target so I need to network hard" story. You're in the door so in some ways that issue has been taken care of with this firm. Ask some very basic industry/firm related questions. How do you source deals? How much time do you spend between seeking new opportunities and managing existing assets? You should obviously read their website. Most importantly, keep in contact with them. If you're developing a relationship this early, with some proper maintenance overtime, the results should be fruitful when you begin to seriously seek buy-side opportunities.

1/25/15
1/25/15

Impressive networking. It will pay off bigtime and it seems that the top levels of every wall street career are built on a mix of hustle and personal relationships which add up to rainmaking ability.

Global buyer of highly distressed industrial companies.

1/25/15

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