by Brian DeChesare Comments (499)

How to Get Into Private Equity: Step-by-Step Guide

How to Get Into Private Equity

When it comes to tricking people on the Internet, one of the easiest methods is to write about “how to get into private equity.”

Not all these articles all bad; some have a few decent tips and tricks.

But most guides fail to disclose one important point: Unless you have exactly the right background, it will be an uphill battle to break into private equity.

Still, you’re probably obsessed with working at KKR or Blackstone, so I’ll explain the entire process from beginning to end – including why it’s so ridiculously hard to break in:

How to Get Into Private Equity: Your Brutal Reality Check

Whenever I write about this topic, we tend to get questions from non-traditional candidates who believe that their backgrounds will appeal to private equity firms. For example:

Unfortunately, you have a very low chance of getting into private equity from these fields.

Overwhelmingly, private equity firms hire:

  • Undergraduates for junior-level roles, such as Private Equity Analysts (common in some markets, such as Brazil and Portugal, and increasingly common at mega-funds and upper-middle-market funds in developed markets)
  • Professionals who already work in PE at different firms
  • And smaller firms also hire IB Analysts at middle-market and boutique banks.

It is possible to get in if you’re not in one of these categories, but it is not probable.

If you get into the industry and you’re not in one of these categories, then:

  • Or you’re aiming for new or smaller funds that do not have highly structured recruiting processes.

I’m not trying to scare you away, but I do want to be realistic about your chances.

What If You’re Not in Those Categories and You Still Want to Know How to Get Into Private Equity?

My top recommendations would be:

  • Consider corporate development careers instead of PE, especially if you’ve had prior banking experience. The pay is lower, but the work environment is better, you can have a life, and the work is similar. And you can potentially move into PE or IB from here.

For the rest of this article, I’ll assume that you’re in investment banking or a related transactional role, or that you’re in a market where non-bankers can get in.

Private Equity Recruiting: On-Cycle and Off-Cycle Processes

First, note that there both on-cycle and off-cycle recruitment processes; they differ in timing, steps, interviews, and hiring criteria.

The On-Cycle Recruitment Process

The on-cycle process is the one that begins for Analysts at bulge-bracket and elite-boutique banks in New York within a few months of their start date.

It starts and finishes very quickly, with the mega-funds interviewing everyone and handing out offers in a single weekend, and middle-market firms finishing after that.

Headhunters have a ridiculous amount of power in this process, and if they don’t like you, you’re screwed.

If you finish the on-cycle process and win a job offer, the position will start in 1.5 – 2.0 years.

So, you may interview in December of 20X1, keep working in banking, and then begin the PE role in July or August of 20X3.

The Off-Cycle Recruitment Process

The off-cycle recruitment process is for everything else:

  • roles outside of New York
  • roles in other countries
  • roles at smaller firms
  • roles available to anyone not working at an investment bank

In the off-cycle process, you start working immediately after winning the offer, which makes a lot more sense than waiting for 1.5 – 2.0 years.

Off-cycle processes tend to take more time – months rather than weeks or days – and interviewers evaluate your “fit” and critical thinking abilities in more depth.

Case studies and financial modeling tests in on-cycle processes tend to be time-pressured ones where you have to get the answer as quickly as possible, while the ones in off-cycle processes require more thought and a real investment thesis.

In some places, the typical process is in between these extremes.

For example, many headhunters in London begin contacting candidates a bit later than in NY, and they present both “start immediately” and “interview in advance” opportunities.

Larger London funds stick to more of a set schedule, but it is not as structured as it is in NY.

Regional Variations in Private Equity Recruitment

In markets outside the U.S. and U.K., the interview questions and case studies or modeling tests tend to be similar.

However, the process, timing, and candidates all differ. The industry size and deal focus may also be different.

To give you a specific example, take the private equity market in Brazil.

The main differences vs. the markets in the U.S. and U.K. include:

  • The industry is far smaller – total PE deal value is around 5% of the total deal value in North America. As a result, there are fewer firms and fewer positions.
  • PE firms still hire a lot of former bankers, but you can also join as an undergraduate, do a part-time internship, and convert that into a full-time offer. This move is less common in developed markets.
  • The process is far less structured, and almost every firm uses off-cycle recruiting. Headhunters have significantly less power, and you can network your way into interviews more easily. The entire process might take from 3 weeks up to 3-6 months.
  • Technical questions and case studies are similar, but you’re more likely to get growth equity cases that involve 3-statement models with minimal leverage rather than traditional LBO models…as you see in this Atlassian growth equity case study.

I’m highlighting Brazil because many of these differences also apply to other emerging markets, such as China, Russia, and India.

In fact, they may even apply to other developed markets that are smaller than the U.S. or Europe.

Even though the process is less structured, it does not necessarily mean that you’ll have an easier time as a non-traditional candidate: there are also fewer firms and fewer positions.

What to Expect in the On-Cycle Process

We published a detailed article about on-cycle private equity recruitment, so I’ll link to that rather than repeating everything here.

To summarize:

  • you start working in August as a first-year IB Analyst.
  • Within months of that, headhunters, such as CPI, Dynamics Search Partners, SG Partners, Henkel, Amity, and Oxbridge, begin contacting you.
  • Then, you’ll schedule your first meetings with headhunters, and you’ll need a very specific idea of the PE firms you’ll pursue (industry, geography, deal type, and size).
  • You will have almost no real deal experience by this point, so you’ll have to spin pitches and early-stage assignments into sounding impressive.

After that, you’ll get invited to networking events held by PE firms.

The mega-funds kick off recruiting on Friday night one week, interview each candidate 4-5 times over the weekend, give each one a 2-hour modeling test, and notify the winners by Sunday/Monday.

After that process ends, middle-market funds start and finish recruiting; they still tend to conduct 4-5 interviews and one speed-based modeling test, but they take place over a longer period, such as a week or several weeks instead of 48 hours.

The frustrating part about on-cycle recruiting is that headhunters have a ridiculous amount of power, and they use tunnel vision to filter and recommend candidates.

  • If you worked in FIG, good luck winning interviews at tech-focused growth equity firms – even if you mostly worked with fin-tech companies.
  • If you worked in Oil & Gas in Houston, good luck winning generalist roles in NY.
  • Also, if you’re not at one of the top banks in a solid industry group – rather than ECM or DCM –  and you don’t have an elite university and good GPA, it will be tough to win interviews.

You can practice discussing your deals and building LBO models, and it certainly helps.

But your fate is determined based on events that took place years ago, like that Chemistry final you bombed in your first year of university.

What to Expect in the Off-Cycle Process

The off-cycle recruiting process is the opposite of the on-cycle one:

  • Headhunters have little power here; if you’re a non-traditional candidate, headhunters will barely pay attention to you.
  • Rather than picking firms based on specific criteria, you should spread as wide a net as possible because the companies that show the most interest may be completely random.
  • Rather than starting and finishing in 48 hours or 2-3 weeks, off-cycle processes can last for many months as you meet everyone at the firm multiple times.

These processes are all about your own networking efforts, including LinkedIn/email and any referrals you can get from co-workers, former co-workers, and alumni.

In the on-cycle process, if you have TMT experience, you pretty much have to target TMT-focused PE firms in your area with an AUM between $XX and $YY.

But in the off-cycle process, this would be a mistake: It’s far too specific a goal, and it will artificially limit your options.

Instead, find every boutique and middle-market fund you can, and reach out to Senior Associates and Partners at these firms to present yourself.

Competitive tension is incredibly important because the first question anyone will ask you is: “Who else are you speaking with?”

If you can’t name several other, similar funds, the person will immediately lose interest in you.

Even if you’ve just exchanged emails or LinkedIn messages with someone, spin it into sounding more important: “I’m currently speaking with Firms X and Y, and I have an interview with Firm Z tomorrow.”

You can call informational interviews “interviews” because they do turn into real interviews.

There isn’t necessarily an ideal time to start this process, but you may want to wait until the on-cycle process is done; smaller firms may not even pay attention to recruiting until then.

Private Equity Interview Questions and Answers

Private equity interview questions fall into five main categories:

  • Category #1: Fit/BackgroundWhy private equity? What do you know about our firm? What are your long-term goals, and how do we fit in? What are your strengths and weaknesses?
  • Category #2: Market/Industry – Which industries do you find interesting? Which companies would you invest in? Which markets do mainstream investors view incorrectly? What makes a market appealing or not appealing?
  • Category #3: Technical Questions – These are similar to investment banking interview questions, but sometimes there’s more ‘critical thinking’ involved. For example, they might ask you why two companies with similar growth profiles and margins might trade at very different multiples and what it means for their investment profiles.

You’ll also get questions on tests of mental horsepower, such as “quick IRR math” for leveraged buyouts [Tutorial Video].

Questions will not be exclusively limited to LBOs. Accounting, valuation/DCF analysis, and even merger models could still come up.

  • Category #4: Deals/Clients – You’ll have to walk through at least 1-2 deal/client experiences in-depth, explain what you did, and point to the value you added. Did you find a major mistake in due diligence that saved your client money? Did you find a way to position your client that resulted in new buyers or more qualified interest?

You should also prepare critical views of all your deals: If you were a PE firm, would you have acquired your client? Why or why not? Interviewers often turn your deals around and ask questions like that.

  • Category #5: Case Studies and Modeling Tests – Modeling tests can range from 30 minutes (“paper LBO models”) up to 1-3 hours, or even several days to a week.

Types of Modeling Tests

The main categories of modeling tests are as follows:

Very Quick Tests – They might give you 30 minutes and ask you to build a simple LBO model using pencil and paper, with approximations and mental math.

Intermediate Tests – These could last from 1 hour up to ~3 hours; you’ll build a real LBO model in Excel, but you may not necessarily build a full 3-statement model. You could easily get away with a cash flow-only model, especially for a 1-hour test.

Take-Home Tests – These are the most difficult ones because you need a real investment thesis, risk factors, and decent industry knowledge.

  • Example: This Dell LBO case study is a good example, but the model itself is far more complex than what you normally build. Focus on the short presentation at the end.

You might have a few days up to a week to complete a test in this last category.

Even though you have 10x more time, you should not build a 10x more complex model; spend that extra time learning the industry in-depth and coming up with a solid thesis.

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How to Get Into Private Equity: Winning Offers

Most candidates focus far too much on the modeling tests and technical questions and not enough on the other question categories above.

That is a big mistake because private equity interviewers, like investment banking interviewers, ultimately make decisions based on cultural fit.

Yes, you need to know how to build a model, write an investment thesis, and answer technical questions, but those are more like boxes they have to check than anything else.

That is especially the case in off-cycle processes.

The formula for success looks like this:

  1. You Can Answer Technical Questions and Build Models Relatively Well – Good! Extra bells and whistles mean less than getting the fundamentals right.
  2. You Have Good Reasons for Wanting to Be in the Industry – For example, you have a long track record of investing, you analyze industries for fun, and you have strong views on companies and deals. You’re not just doing it for “improved hours and pay.”
  3. You Have Added Value to Deals and are Capable of Running Deals – No one will hire you if they have doubts about your ability to work independently.
  4. You Pass the Airport Test – You will be in airports a fair amount, so the Partners and other team members must want to spend time with you.

So You Win a Private Equity Offer: What Next?

If you reach the end of the process and win an offer, congrats!

You should accept it, especially if you won it through an off-cycle process, because your chances of getting into PE are just barely above being struck by lightning.

You could attempt to shop it around and win other offers, and sometimes that will work, especially in the on-cycle process.

But unless you have a really, really good reason for doing that, it’s best to accept your results.

No Offers: What Now?

If you go through the entire process and you don’t win offers, you need to figure out what went wrong.

  • Did you not get enough interviews?
  • Could you not tell your story effectively?
  • Did you fail the technical parts and case studies?
  • Did you not have relevant enough experience?

Once you’ve pinpointed the problem, getting brutally honest feedback if necessary, fix it.

You might fix these problems with a different approach to networking, business school, more practice, or a “steppingstone” role, such as Big 4 valuation/M&A, first.

Final Thoughts on Breaking Into Private Equity

Truthfully, the PE recruiting process does not require much intellectual horsepower.

It’s not that difficult to build an Excel model quickly, plan out your story, or prepare deal discussions.

You’re not building rocket ships; you’re doing arithmetic.

The biggest challenge is that many people go into recruiting without a clear idea of what firms are looking for, what your background must look like, and the proper strategy to use.

Get those right, and you might just avoid being tricked on the Internet.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hey Brian,

    I graduated from a 5 year bachelor degree in civil engineering, however, I never had passion for engineering and I’ve always wanted to work in finance. so my research led me to one conclusion, that studying for the CFA and gaining relative experience would help me break into the industry I like. So i finished CFA level 1 December 2018 with my score being almost within the top 10% worldwide. I was able to spin off my story and gain internships in corporate finance position working on capital budgeting and rationing, i was able to land an analyst internship in an Asset Management firm, where I was working on analyzing selected stocks and there interaction with the portfolio and trying to find the best portfolio that matches our clients needs. Then I was able to reach my goal and dream opportunity, which is being a junior private equity analyst intern in one of the major national banks in my home country, Egypt.

    My dream is to work in PE in the Canadian Market, so I targeted a top business school in Canada and I was accepted in Queen’s University’s MFin Program graduating 2021. My plan is to finish the MFin program, while finishing level 2 and 3 of the CFA. And since I am so interested in Alternative Investments and private equity, I am considering also tackling the CAIA while I am doing the masters program. Even though when i finish the master’s program I will have around 1.5 years of experience in Egyptian market in addition to CFA and CAIA, not to mention I am already improving my financial modelling skills to the max, I was still told that I cant have a PE analyst job postgraduate because it is extremely tough to break into PE in Canada and that I don’t have Canadian experience.

    I was wondering does my plan sound legit? If not, what do you recommend doing to be able to work at one of the top PE firms in Canada like Onex, Birch Hill Equity Partners, Novacap Investments and CI Capital Partners for example, what should my plan realistically be?

    Thank you for your prompt reply and help!

    1. I think it will be extremely difficult to win a PE offer in Canada, given the work/visa situation there. See: https://www.mergersandinquisitions.com/investment-banking-private-equity-canada/ and https://www.mergersandinquisitions.com/canada-corporate-finance-jobs/

      You might be able to do it under the “skilled immigrant” visa category, but even there, some type of corporate finance role is more likely.

      I don’t think another level of the CFA or the CAIA will help at all because getting into PE is almost 100% work experience and education and networking. And yes, the lack of Canadian experience and citizenship will count against you.

      If you want a good chance of working at any of those firms, you will need to sort out the work visa situation first (which we cannot advise on), and then you’ll most likely need to win an IB role in Canada, which is also very difficult because it’s a small market (see: https://www.mergersandinquisitions.com/canadian-pension-fund-jobs/).

      They’re going to discount experience in Egypt because the assumption, right or wrong, is that you don’t do as much “real work” in emerging/frontier markets.

      1. Hi Brian,

        Thank you for your reply! I have checked the links provided, however I am still hesitant about couple of points. What is the best course of action to reach my goal? Given that after the Masters program I will have a full time work permit. should i try working in pension funds then make the jump? or should i target investment banking and then consider the shift to PE?

        Putting the work permit and Visa aside, which path do you recommend? and what exactly should i do along the path you will recommend to reach my goal as fast and efficient as possible?

        Thank you!

        1. If you can work in Canada afterward, then I think you’ll need to target IB firms first before considering either pensions or PE. If that doesn’t work out, then maybe you can think about Big 4 TAS groups (or similar) and apply from there. But I don’t think pensions or PE firms in Canada are going to give you “full credit” for your experience in Egypt.

          The path is pretty simple: gain internship experience in Canada before/during the program, target IB roles out of the program, if those don’t work, go for Big 4 roles, and then recruit for PE firms or pensions after that.

  2. Do you have any recommendations for Associate investment bankers who are looking to move into PE?

  3. Avatar
    Joe Filis

    Hi Brian,

    I know it’s best to be specific with the roles you’re looking for, but is it acceptable to tell different recruiters different preferences and to give different roles a shot without appearing uncertain to any one headhunting firm.

    Thanks

    1. If you can keep them all straight in your head, sure, but in practice, it’s quite difficult to interview for multiple different roles if you are already working full-time. So I don’t think this is a great idea in most cases.

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