Different countries have different criteria and selection procedures for private equity (PE) careers. Even in the USA, the selection procedure differs in different states and firms. If you are working in investment banking or any other financial expertise-related space, then the selection happens through ‘on-cycle process. If you are working in any other domain, then your selection will happen through an ‘off-cycle process.
The Overall Private Equity Interview Process
Most of the companies who are hiring for private equity jobs entry-level will test you for a few specific skills.
- Multiple Rounds- After the initial HR round of generic questions, you will have to go through 3-5 rounds of interviews depending on your experience level and the position you applied for. If it is for private equity jobs entry-level like PE analyst or PE associate, then typically there will be 2-3 rounds of interviews. However, for Director, Principal, Managing Director (MD), or partner roles, the levels of the interview can go up to 6-7 rounds.
- Topics and Timeframe- Typically the interviews for PE positions can go from 1-2 months, however, it depends on the urgency of the firm which is hiring. Normally your background and fitment will be judged first. Then there will be a round of technical questions, which will test your domain knowledge.
If you have prior experience, then a thorough inspection of the way you dealt with your previous clients and deals will be done. There will be multiple scenario-based questions that will test your capability to handle real-time situations. Private equity interview questions will include the strategies and portfolio related to the firm which is interviewing you. Hence you need to read about all the information which is available in the public domain. It will be better if you have friends working in the firm where you are attending the interview so that you have a better idea about the firm’s clientele.
- Private equity interview questions will include multiple market/industry questions, current trends, what kind of companies will be profitable in the days to come, etc. They will send complete case studies and you need to read them thoroughly and be prepared to answer to the questions from the case studies. You will be asked to do financial modeling during the interview process.
Private Equity Interview Topics
Private equity interview questions will be based mostly on these topics-
- For background/fitment screening, the most common question which will appear in different colors is ‘’why did you choose private equity as a career path?’’ Be prepared to answer to questions pertaining to your strengths and AOI (areas of improvement) as the interviewers tend to do a SWOT (Strength, weakness, opportunity, and threat) analysis of your personality traits here.
- If you are a fresher, give examples from your internship experience.
- Technical questions will include deal experience, weighted average cost of capital (WACC), and others pertaining to the negotiation process.
- They will test you on your ability to lead, manage, and close deals. They will check your knowledge about “investor’s view” of each deal or M&A.
Few Firm Knowledge/Industry-related Interview Questions and Answers
Do a thorough study of the topics mentioned above and check the internet for relevant questions. Here are some of the examples-
Q- What are the limitations of a DCF (discounted cash flow) model?
- Talk about the issues it poses regarding the terminal value. Give live examples of any deal which you might have closed and your approach to the same. If you have not closed any deal/did not have exposure to DSF model, then collate a bundle of case studies that you can use to showcase the same.
Q- What assumptions is an LBO (A leveraged buyout) model most sensitive to?
- Focus on the debt/EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) ratio in the balance sheet and explain the vulnerabilities. Talk about the working capital ratio and how the company is performing. Talk from a practical perspective that if the investor invests in the firm, what kind of ROI he can expect based on the previous balance sheets.