Private Equity Series #6: 9 principles to help you break in

The private equity series is a collection of articles written by Quentin,  who moved from consulting to private equity through movemeon.  This is Quentin’s 6th and sadly last articles.  Other articles from the series below: 

#1 All PE funds were not created equal

#2  When to look for the boarding gate?

#3 29 questions you should have answers to before accepting an offer

#4 12 usual activities of a PE Associate

#5 The double-edged sword of working in private equity

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Throughout this series I have had the opportunity to cover the private equity industry from a number of angles. I have not however discussed how to get a job as an ‘investment professional’, with particular consideration for applicants coming from a strategy consulting background – whose popularity in PE funds is growing. Here are a few personal principles that I hope you will find useful in your search.


The private equity remains small, even in London, so openings are limited in number and competition is fierce:

When you applied at McKinsey, BCG, Bain or any of the major strategy consulting firms, you did not have to worry about the availability of vacant positions. Given the size of these firms, you knew that there would be a role for you if you met the selection criteria, no matter when in the year you would send your application. Private equity is a niche industry in comparison. Only a handful of firms employ more than 50 investment professionals in London and the vast majority involve 10 professionals or less. So the first lesson to learn is patience. Looking for a job in private equity also teaches you humility: the competition is intense and thus your ‘success rate’ will probably appear to you as desperately low – although at the end of the day you only need to convert one great opportunity.


Be proactive and open as many doors as you can:

As mentioned above private equity firms are very lean and focus their energy and money on investing. Developing HR capabilities or a fully-fledged recruitment team does not represent a priority for them. As a consequence, openings will never be advertised on publicly-available job boards (or that is a worrying sign) but will instead spread through a limited number of headhunting firms (such as this one) and/or through word of mouth. Last but not least, private equity firms may hire a strong candidate even if they are not actively hiring. Given the financial leverage (i.e. the amount of money you will have an impact on as a professional) a high performer will ‘always pay for himself’. The conclusion is clear: you need to be proactive and not be afraid to reach out to your network and firms directly.


Look for the mutual connection and avoid ‘cold emails’:

As a corollary of the previous point, private equity firms pay a lot of attention on the ‘personal and cultural fit’ when they recruit an addition to their team. In tight-knit environments, a bad hiring decision can prove costly, not only financially but also in terms of team morale. Consequently, you can greatly enhance your chances by connecting with the fund through a mutual connection that will be able to affix his/her ‘stamp of approval’ on your work ethics instead of sending an unsolicited email, no matter how tailored it could be. Thanks to LinkedIn it has never been easier to get an overview of your connectivity with any corporation on the planet. Make an extensive use of that tool!


Prepare for modelling:

A typical interview process at junior level will involve one LBO modelling test, one investment case study (often derived from the modelling exercise) and a series of ‘traditional’ interviews. Even if you were part of the private equity ‘taskforce’ and spent two years performing due diligences as a strategy consultant, LBO modelling and investment case analysis are two concepts you have never tackled in your career, so you need to prepare for the first hurdle. A number of books will do the job perfectly, for instance Rosenbaum’s Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions.


Do your due diligence and adjust your pitch:

Although you will always apply for an ‘Investment Associate / Executive’ role, you will never face two similar situations. This is another difference with consulting where the operating model has been largely standardised; in PE, this is still ‘work in progress’. And yet to optimise your chances of success you need to ensure that your pitch resonates with the firm’s strategy, values, culture etc. You would like to avoid saying “I am specialised in healthcare and financial services” if your target fund only invests in heavy industrial turnarounds or “I like to spend time working with management on cost base improvement programmes” if it only takes minority (i.e; non-controlling) positions in high-growth businesses. As a consequence your pre-interview due diligence is crucial. You can use the questions for interviewers I have already listed in this blog as a guideline. You should complement this systematic view with a more qualitative approach and interview outsiders (e.g. former employees, investors, consultants) to better understand the firm’s ‘investment philosophy’.


Stress your qualities as a strategy consultant:

An increasing number of firms have diversified their recruiting pool and have moved away from hiring solely former investment bankers. Simplistically, investment bankers bring ‘plug & play’ valuation and modelling skills while strategy consultants usually have a better understanding of the underlying business models and can support management teams in the post-acquisition work. Private equity has become more and more competitive and achieving decent returns now requires more than pure financial engineering, hence the need for more ‘hands-on’ profiles. A vast majority of PE recruiters will be aware of that distinction and will know what they get and what they do not when they hire a consultant rather than an investment banker. Nonetheless others may be at the beginning of that journey still (you will answer this question during your due diligence by assessing the share of former strategy consultants in the investment team) and you may need to stress the aforementioned strengths and show that you are ready to make ‘the extra mile’ to bring your modelling skills up to M&A standards (despite all your training, you will really learn about modelling once you work on a deal).


Be aware of the economic world we live in:

Interviews may include questions such as “In which industry/country would you invest $10m/$100m/$1bn? Why?” or “What do you think of company X?”, where company X is (most often) a large multinational. Following the news may be tough given your tight strategy consultant diary, but I can promise you it is a worthwhile investment, now and in the future. A quick read through selected RSS feeds from the Financial Times complemented with carefully chosen blogs (why not try mine for instance?) may help you back your answer and avoid damaging answers.


Build your ‘championing network’ within your firm:

If you work for a major consultancy, there is a high chance that your target PE firm has already worked or will work in the short to medium term with someone from your firm. Beyond the formal ‘reference check’ process, your prospective employer may informally (and tactfully, hopefully!) ask one of your Partners about you if he happens to be working together on a project while you are applying.


Be ready to commit long-term:

Private equity is a long-term game. You will only make it rewarding if you follow the life of a fund end-to-end. Intellectually, you will have followed a number of investments from origination to exit. Financially, carried interest can represent a significant boost to your compensation and is often heavily discounted if you leave before the liquidation of the fund. Unless the role is explicitly designed for a short-term experience (e.g. Associate program in some US funds), the “I am here to get an experience for 2-3 years and move on” card you could play in consulting will get you a red card in PE.


This post (sadly!) concludes my series on PE. I hope you have found it useful. If you still have questions, feel free to reach out via LinkedIn or my blog.

And good luck!

- Quentin

Other articles in Quentin’s PE series: 

#1 All PE funds were not created equal

#2  When to look for the boarding gate?

#3 29 questions you should have answers to before accepting an offer

#4 12 usual activities of a PE Associate

#5 The double-edged sword of working in private equity

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