How does private equity recruitment work?
Private equity is a highly competitive field with limited but highly paid roles. Most Investment Banking Analysts and top students dream of landing a job at a private equity firm.
The private equity recruitment involves headhunting firms and multiple rounds of interviews with financial modeling tests.
There are two types of recruiting processes: on-cycle and off-cycle. The main differences between on-cycle and off-cycle are the timing and how formal the entire process is.
PE firms hire candidates with very specific backgrounds: bulge bracket Investment Bankers and top tier Management Consultants.
In contrast to university recruiting, where candidates can apply online or participate in on-campus recruiting activities, most PE firms do not offer a formal online application process. Instead, they rely heavily on headhunters to fill these positions. Private equity firms usually hire headhunting firms for their recruitment process.
Private equity recruiting process
On-cycle recruiting starts abruptly after Analysts start their new jobs. It's a short and intense process with offers 1 to 2 years in advance. This process is unique to North America.
Off-cycle recruiting is less structured and happens at any time during the year. If you get an offer, it will not be years in advance. You can start immediately after your termination notice.
On-cycle recruiting
The on-cycle process usually starts during the fall, in which private equity firms recruit young talent for their future associate classes.
The on-cycle recruiting starts abruptly just a few months after Analysts at bulge-bracket and elite-boutique banks start their new jobs. It's a short and intense process. So, to participate in on-cycle recruiting, you must follow the private equity recruiting timeline and be prepared beforehand. All the firms do the bulk of their recruiting within the same week. This process is unique to North America.
The process is highly chaotic and abrupt, with most private equity firms recruiting within the same week. Firms are not coordinating with one another to ensure that candidates have a reasonable interview timeline.
For Associate positions, the on-cycle process starts around July to October, shortly after Analysts at bulge bracket or elite boutique banks start their new jobs. The process is rapid and private equity headhunters are key gatekeepers who decide who gets invited. Start the start date of offers is usually up to 1 to 2 years in advance.
Off-cycle recruiting
The Off-Cycle Private Equity recruiting process is an alternative pathway to break into PE, particularly for those who may not have perfect credentials.
The off-cycle process is less structured and happens any time during the year compared to the more structured on-cycle process. This puts you in the driver's seat of your process.
If you're at a smaller bank, headhunters may not reach out to you as proactively. So, you'll have to do some networking on your own.
Off-cycle recruiting is typically on a rolling basis throughout the year. Firms are not in a rush and the recruiting process takes longer. You have time to prepare your deals, technical knowledge and your story.
The entire recruiting process often takes several weeks to months, giving candidates more time to prepare and make a good impression.
Regarding technical skills, requirements for on-cycle and off-cycle processes are identical. You shouldn't expect anything easier. Private equity generally has very narrow hiring criteria.
In Off-Cycle recruiting, private equity headhunters may or may not be involved. It depends on the fund. PE firms tend to outsource their recruiting completely. However, some firms have job postings in addition to hiring headhunting firms. So, it's a mixed bag.
If you get an offer, the start date will not be years in advance. You can start immediately, usually a few months after your termination notice.
Why is it so hard to get a job in private equity?
PE firms have very narrow hiring criteria and can be exceptionally selective. They look for candidates with a particular set of skills and experiences that align with their investment strategy. This makes it difficult for those who don't have the perfect background to break into the industry.
Limited openings
Unlike larger Investment Banks, private equity firms operate with lean teams. This means there are fewer job openings available, making it a competitive field.
Technical questions
In private equity interviews, technicals are considered a hygiene factor. Everyone has spent one or two years at a reputable Investment Bank. Every candidate is expected to have critical thinking abilities and to answer these questions correctly.
Deal experience
Private equity funds seek candidates with experience with deals that match their investment focus. This means that your experience needs to align with the types of investments the firm makes. If you want to break into a TMT-focused fund, you must have some software deals.
Personal fit
This can be a hit or miss in private equity interviews. It would be best to vibe well with your interviewer, as PE firms often look for candidates who mesh well with their existing team. Since the teams are usually small, personal fit is crucial in the interview process.
How to prepare for private equity recruitment
Update your private equity resume
As with any other professional role, you must keep your resume updated. This is the first step to participate in the recruiting activities.
PE hiring managers are extremely busy and only quickly glance over your resume. You want to highlight the most critical points immediately.
The ideal PE resume has the following structure:
Primarily focus on relevant Investment Banking and deal experience. These are your main highlights. You want to show exposure to relevant deals
Mention previous internships and jobs briefly, only if relevant
Include educational credentials incl., grades and standardized testing scores, such as GPA or SAT scores
Prepare yourself for multiple interview rounds
Once you get invited, the real business starts. Expect multiple rounds of interviews. The number of rounds depends on each firm.
First, you need to pass the screening of headhunting firms. Then, you will get a chance to interview with the actual private equity firm.
From there on, there will be at least 2-3 rounds, maybe even 4-6 rounds of interviews with junior and senior professionals. Expect a financial modeling test. Towards the end of the recruiting process, you will get to interview with the partners.
For the on-cycle recruiting process, you can expect the process to be quick and intense. For the off-cycle recruiting process, things can drag along for months because there is no time pressure.
Prepare for technical questions
Accounting and valuation
These are basics and go without saying. You should know how the three statements are linked together. You will likely not get direct accounting or valuation questions but within the context of your deal experiences.
LBO model
Be prepared to walk the interviews through an LBO. You should know the ins and outs of an LBO, like the back of your hand. This is the daily business on the buy side. Understand sources and uses, what the main drivers are and how debt capacity works.
Deal experience
Be prepared to discuss any deals you've worked on in detail. This includes your role in the deal, the deal structure, how it was valued, and the outcome. Briefly summarize the deal background and describe your role. PE funds want to see whether you are due diligence experienced and have the big picture in mind. Keep your response concise and focused, ideally within 30-60 seconds. The goal is to set a high-level context for your interviewer rather than diving deep into details.
"Thinking like an investor"
You should be able to evaluate whether a company is a good LBO candidate. This involves understanding the company's financials, industry position, and growth prospects. It would help if you showed that you can think like an investor. PE is more about evaluating whether a company is a good investment opportunity rather than focusing on execution like in Investment Banking.
Financial modeling tests
You will 100% at some point during the recruiting process, get a financial modeling test. Yes, you will have to build an LBO model from scratch. Knowing how to use your Investment Banking template is not good enough. This is a speed and accuracy test.
Prepare for personal fit questions
Similar to Investment Banking, to get a private equity job, you will need to make a good case why they should hire you. The structure of the personal fit questions is the same:
Walk me through your resume
Why do you want to work in private equity?
Why do you want to work in this private equity firm specifically?
What are your strengths and weaknesses?
First, you introduce yourself. Then, why PE and why this PE firm specifically? You should have a closer look at their investment strategy and their most recent transactions. There should be a strong match to your transaction experience.
Show that you think like an investor and not like an execution-focused Investment Banker.
Know the firm's culture. Understanding the culture of each private equity firm before walking into an interview is critical. PEs operate with smaller firms and every hire must be likable within the existing team structure.
