Some of the hardest questions to answer in the private equity interview process are not the technical ones but rather the behavioral ones. A lot of people tend to gloss over these questions for fear of getting the technical questions wrong, but many would agree that nailing the behavioral questions has an arguably much larger impact on whether you land the job or not! Let’s go over a few of the top private equity interview questions and how you can differentiate yourself from others when answering them.
Why are you interested in private equity?
The answer to this question should hinge upon two things: your concrete prior experience and your willingness to learn, or intellectual curiosity. To start, you can use some of the content from your “Tell me about yourself” or “Walk me through your resume” questions to frame your prior experience for the interviewer. It’s important to not get too lost in the details here. Think about the specific experiences you’ve had that relate to private equity (e.g., you were a member of an investment club, had a prior internship in finance, or have family or friends who work in the industry). From there, you can form a direct line from the prior experience(s) that make you interested in working in private equity.
The first part of the question becomes a little more nuanced if you don’t have directly applicable experience, but it can work if you compellingly tell your story. For example, if you’ve worked in consulting, you might not have the same job experience that bankers or other investment professionals have. But you could take the initiative to invest independently or even create a fake portfolio to track companies in sectors you’re interested in. These can be examples you use to show your interviewer that you’re interested in investing. Then, your intellectual curiosity can shine through by telling the interviewer what you hope to learn in the job (i.e., how private equity professionals add value to their portfolio companies) and how you can use concrete skills and learnings from your prior roles to contribute to the team.
Why are you interested in our firm?
Doing your research is key to answering this question. Most, if not all, private equity firms have websites with an overview of the investment strategy, assets in the portfolio, and key team members. All of these components are important to dig into to formulate a response. A bonus is if you’ve had a chance to interact with anyone on the team and you can draw from those conversations to speak to why you like the culture of the firm.
First, knowing the firm’s investing strategy is key, not only for the interview but also so you can determine if you are aligned with the firm’s goals and processes. You can start your answer to this question by briefly describing what you know about the firm’s investing strategy and elaborating on why that appeals to you. For example, if you are interviewing for a growth equity fund, you can talk about how being part of a startup club in college got you interested in earlier-stage investments, but you also like the amount of downside protection in growth equity that isn’t present in VC.
Second, read about every asset in the portfolio and choose 1 or 2 that you think are particularly intriguing. In your answer, you can talk about how you are drawn to certain sectors or types of companies the firm invests in and cite the examples you noted so that the interviewer knows you did your research. If you want to take this a step further, choose a portfolio company and talk about how the firm’s ownership is helping to revolutionize that industry or any notable news you’ve seen on the company (whether on the firm’s press section of its website or elsewhere). You can also use your knowledge of the firm’s portfolio companies to ask thoughtful questions at the end of the interview about their growth trajectories.
Lastly, answering this question successfully requires establishing some connection to the team members, whether that is through actual conversations or your research by looking at LinkedIn. If you can draw a connection between the schools you’ve gone to, the sports you played, or the fact that the people you spoke to really liked the group culture, that goes a long way to show the interviewer that you would be able to fit in with the group.
What makes a great private equity professional?
If you’re interviewing for an analyst or associate role, your job will be to help the deal team execute investments to make more money and save money by operating existing portfolio companies efficiently. You can draw on past experiences of how you’ve added value to your teams to answer this. In particular, if you’ve run workstreams independently, you should highlight what the team gained from your contributions and what you learned from those experiences that you can bring to the firm you’re interviewing at.
What do you think makes a “good” investment?
There are a few key areas you should focus on when talking about your investing strategy. If you haven’t already talked about the firm’s strategy, you can draw on some of the principles they have to talk about what makes a good investment. To answer this question, you should explain how you would think about the market surrounding the investment: competition, stability of cash flows, growth potential, and the caliber of the management team. These are some of the major ones, and you should feel free to add other criteria specific to the firm you’re interviewing with.
The stability of cash flows is essential to protect your investment, but the last two criteria are important to highlight since this is what drives most of the returns in private equity. Growth potential will be impacted by the market you’re in and the strength of the competition, so you want to emphasize that you want to find companies with some sort of differentiation in the market and with competitors who aren’t doing the same thing in the same areas. You also want to be able to identify multiple levers for growth, so your eggs aren’t all in one basket. For the management team, this is important to evaluate because strong management will be able to execute your growth plan, while a team that isn’t aligned with you (both in the growth plan and financially) won’t be incentivized to help your firm realize growth.
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