by Brian DeChesare Comments (4)

The Private Equity Internship: The Best Steppingstone Role into the Finance Industry?

Private Equity Internships

A long time ago, private equity internships were not “a thing.”

A few smaller firms offered them, but you weren’t likely to complete one during university.

Everyone focused on the 3rd year investment banking internship since it led directly to a full-time offer if you performed well enough.

And that is still true: it is the most important internship in undergrad.

But everything leading up to it has changed.

Specifically, you need to start recruiting years in advance, and you need a sequence of other finance internships before you even apply to the IB one.

There are many solid options for those “pre-IB experiences,” but private equity internships are arguably the best of all:

What is a “Private Equity Internship”? And What Do Interns Do?

It’s what it sounds like: you work as an intern, usually for 3-6 months, in private equity.

There are thousands of PE firms of all shapes and sizes, so the day-to-day experiences differ, but you’ll get exposure to the same general tasks as an analyst or associate:

  • Building financial models.
  • Reviewing CIMs submitted by bankers who are selling companies.
  • Conducting due diligence on potential investments.
  • Monitoring portfolio companies.
  • Cold calling and cold emailing to source new deals.

The difference is that as an intern, your work will skew toward the last few items on this list: monitoring portfolio companies and deal sourcing (i.e., the “less desirable” parts of the job).

This is especially the case if you’re working at a smaller firm (< $100 million AUM) that has a low headcount; at larger firms, you might get to do more “real work.”

There are very few openly advertised PE internships.

A quick LinkedIn Job Search showed ~500 results, compared with thousands for “investment banking internships.”

The main reason is that most internships in private equity do not follow a strict hiring process in the same way IB ones do – which can give you an advantage.

There are also related internships at search funds, growth equity funds, and venture capital funds, as well as pre-MBA and MBA-level internships, but we’re focusing on internships for undergrads and recent grads.

Why Do a PE Internship?

Unlike investment banking internships at the large banks, PE internships rarely lead to full-time return offers, especially if you’re interning during the school year.

Also, internships at smaller firms are often unpaid or “partially unpaid” (i.e., you earn a small salary only after an initial training period).

So, there are only two good use cases for a PE internship:

  1. As a “steppingstone role” during undergrad so that you have good experience when applying to IB roles later on.
  2. As a “post-graduation Plan B” if you’ve already finished university, didn’t get the job offer you wanted, and are willing to intern and network your way into it now.

Some of the PE mega-funds offer structured internships where you might receive a full-time return offer, giving you the option to start working full-time in private equity, but these internships are extremely competitive.

If you’re not at one of the top target schools with high grades and impressive previous internships, you shouldn’t even think about it.

There are a few reasons why PE internships work well as steppingstone and Plan B experiences:

  1. There’s less competition – Fewer students apply for these roles since they require you to search for people on LinkedIn and Google, guess their email addresses and phone numbers, and reach out aggressively.
  2. There’s sometimes more demand for interns – Since PE firms always need to monitor their portfolio companies and source new deals, there’s more “ongoing work” than there is in IB. By contrast, many banks won’t hire interns if deal activity is low.
  3. It looks highly relevant – Private equity is the next-best experience to have after banking if your post-graduation goal is banking. Even if you do little real work, writing “Private Equity Intern” on your resume or CV will give you a huge boost.

Which Firms Offer PE Internships?

Nearly all the large private equity firms (“mega-funds”) offer some form of internships to undergrads: KKR, Blackstone, Ares, Silver Lake, Carlyle, TPG, Apollo, and, on the European side, firms like Cinven, CVC, Bridgepoint, EQT, and Permira.

Once you move down to middle-market, lower-middle-market, and boutique firms, the list gets a lot more random.

And very small firms (< $100 million in AUM) rarely have formal internships or job openings for them.

But if you do your research and cold email them to ask about positions, you can get responses, and sometimes they are willing to create informal internships.

How Do You Find and Recruit for PE Internships?

If you’re going to apply for internships at the large PE firms, you could look at job sites, figure out which firms have openings, and then apply directly or do some networking beforehand.

However, in 95% of cases, you’ll be applying to the smaller, local firms that don’t openly advertise these roles.

If that’s the case, you can search for lists of these firms online (“[City Name]” “Private Equity”), use the lists in our Networking Toolkit, or gain access to Capital IQ.

Google Maps can also be quite helpful because it will often show results, including phone numbers, that don’t appear in other sources.

You could go to your current location, search for terms like “private equity” or “capital management” or “capital partners,” and then review the local results like that.

Not all these firms will have websites, but you’ll get at least a phone number and address like this.

Once you’ve found a few dozen firms in your area, you can then go to each firm’s website and email the most senior people there to ask about roles. A template like this could work:

SUBJECT: [Firm Name] – Internship for [University Name] Student

Dear Mr. / Ms. [Name],

I am writing to you to see if [Firm Name] might be interested in taking on an intern. I am available to start immediately.

I am set to graduate in [Month Year] from [University Name] with a [XX] GPA. I have developed [Describe Relevant Skills] skills during my [XX] months of [Industry Name] experience as an intern at [Firm Name]. My resume is attached.

I understand that [Firm Name] may have a formalized recruitment process, but if your team is experiencing high deal flow or needs help with administrative tasks, I could be of assistance.

Would it be possible to arrange a call? I would be very grateful for an opportunity to discuss this with you.

Thanks,

[Your Name]

To maximize your response rate, you can search each firm’s site for alumni or others with some connection to you:

“site:firmwebsite.com [University Name or Other Connection]”

To set expectations, a 10-20% response rate from this effort is quite good.

And only a few of those responses will turn into interviews and potential internships.

So, like all networking, it is a numbers game, and you will probably need to find and contact 50-100 firms to see results.

Private Equity Internship Interview Questions

Assuming you contact enough firms, get responses, and then speak with interested firms on the phone or in person, the next step is the interview.

If you’ve marketed yourself as having financial modeling experience and other technical skills, you will get more in-depth questions.

If not, then the questions could be more related to fit, the market, and how you’d conduct the sourcing process.

We cover the main points in the article on private equity interviews; the differences for internship interviews are:

  • Less emphasis on deal/client experience since you won’t have much.
  • Less emphasis on case studies and modeling tests for the same reason.
  • Somewhat-easier technical questions, especially if you’re not claiming modeling skills.

So, it is probably not worth your time to cram at the last minute, read 4,371 pages of guides, and complete 57 modeling tests or case studies.

Especially if you’re an early university student, the smartest approach is to learn the firm very well – its portfolio companies, its investment thesis and strategies, its history, and whatever else you can find.

Preparing for the Internship

Most of the advice in the article on investment banking internship preparation applies here; learn the key Excel and PowerPoint shortcuts, learn to read financial reports, read up on deals in your sector, and establish the right appearance and mindset from the start.

However, there are a few differences:

  1. If you’re working at a small firm, networking before and during the internship isn’t that important because there might only be a few people in the office. Yes, learn about their backgrounds before you start, but focus on doing good work above all else.
  2. The hours in most PE internships, especially off-cycle, school-year ones, are not that brutal, so you don’t need to do anything fancy to adjust to the schedule.
  3. You need to know the firm’s investment thesis and industry focus very well. Learn their portfolio companies, trace the history of their deals, and find their fundraising history.

I do not think it’s a great idea to go all out with financial modeling and technical preparation, at least if the internship is an off-cycle or part-time one at a small firm.

If you’re interning at one of the mega-funds, then it’s more worthwhile to put in the hours in this area.

How to Make the Most of a PE Internship

Since the average PE internship doesn’t lead to a full-time return offer, you should aim to get two main things out of it:

  1. Good experience on your resume / CV – Being able to write “Private Equity Intern” will help, but writing about deals will help even more.
  2. Referrals and recommendations – Almost anyone who works in PE knows bankers and other people at large banks. If you perform well enough, you can ask them for referrals for your next role.

With the first point, I recommend heavily spinning what you did and using the same strategy discussed in the IB internship guide: take a portfolio company, build a model for it, and do some industry research in your downtime.

Then, describe this company as if it were considering an M&A deal or debt or equity financing and say that the deal was in its early stages when you left.

You can also use your downtime on the job to study accounting and financial modeling by reviewing models from previous deals the firm completed.

On the second point, the best way to get recommendations is to make everyone else’s life easier.

Show up on time, do the boring grunt work, double check your deliverables, and save everyone else time with tasks like updating financial reports for portfolio companies and researching new investments.

Private Equity Internships: Pros and Cons

You need a sequence of internships before you apply to IB internships at the large banks.

So, the real question here is, “Is it worth completing a private equity internship as part of that sequence?”

The answer is almost always yes, as long as you understand the trade-offs:

Benefits / Advantages:

  • It’s highly relevant experience for IB and other deal-based roles and the next-best thing after an actual IB internship.
  • PE internships are often easier to win than IB internships because of less competition and higher year-round demand for help with administrative tasks.
  • If you graduated without the full-time role you wanted, off-cycle PE internships could be a good “Plan B” for eventually moving into IB or other deal-based roles, such as corporate development.
  • You could gain solid referrals and recommendations from the internship.

Drawbacks / Disadvantages:

  • PE internships at small firms are almost always unpaid.
  • While there is less competition, you still have to do a fair amount of networking to have a good shot, and undergrads are often quite bad at networking.
  • You’re unlikely to gain in-depth deal or modeling experience unless you’re interning at a larger firm (or you’re proactive and get very lucky!).
  • PE internships rarely lead to full-time offers unless you’re interning at a fairly large firm with a structured program.
  • There’s some risk of negative signaling if you complete too many PE internships, such as 2-3 rather than just 1, before you apply to investment banking. You don’t want to get questions such as: “Wait a minute, do you want to do banking? You’ve already done 3 PE internships!”

As recruiting moves earlier, PE internships will be even more of “a thing” in the future.

And if you understand the trade-offs, you’ll be in a good position to use them for a leg up in your career.

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.

Break Into Investment Banking

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

We respect your privacy. Please refer to our full privacy policy.

Comments

Read below or Add a comment

  1. Avatar
    Raghav Setia

    Hey Brian
    I regularly receive your mails and I must say your write-ups are really helpful in demystifying the finance industry. I’ve done engineering in Computer Science and have got an admit for Baruch at CUNY.
    I’ve like a couple of months’ experience in sales in a brokerage firm, and also I’ve completed a professional Financial Modeling program.
    How can I approach working for a bank with a masters in finance that I’ve enrolled for, and the credentials that I have?
    I know you’re quite helpful.
    I’ll be much grateful for your guidance.
    Thanks

    1. Thanks. I think you can use the strategies outlined here – find boutique banks in your area first (should not be hard since it’s NYC…), email them to introduce yourself, and try to do the internship before the MSF starts so you have the experience before you arrive on campus. And then use that experience to apply to larger firms that offer internships with return offer possibilities.

      I don’t think you have enough experience to apply directly to the large banks right now and have a good shot at getting in… you need something more closely related to IB/PE first.

  2. Hi Brian,

    I am curious: if PE is the dream exit route for IB as you’ve indicated in previous articles, how come PE internships are lowly regarded?

    1. I think the biggest issue is that PE internships haven’t been a part of “the track” for that long. The perception is that you don’t do much real work, and it’s often a lot of cold calling and boring reporting. They’re not really the “dream exit route” because the PE Associate role is very different from the PE Intern role.

      Also, PE firms have only started to focus on undergrads and recent grads relatively recently.

Leave a Reply

Your email address will not be published. Required fields are marked *