hey guys, i was wondering if anyone has had any private equity experience? I am interviewing with a mid-market focused US PE firm for an associate position and i was hoping to gather some inputs regarding interviewing tips, etc… 1. what kind of questions do they ask? 2. what questions should I pose to them? 3. what should i talk to them about, regarding market, m&a, etc? 4. how can i convince them that i am who they need? 5. other than modelling and execution, what else do PE firms look for in an associate? 6. how can i spin the cfa program in my favor here? thanks a lot people
- Anything is fair game (why did you go to school x, why did you choose job y, what have you learned, what do you like vs not like about current job, what makes a good lbo candidate, what do you feel about the current environment for sponsors, case studies, lbo math, etc) 2) Ask about deal origin (auction, sourced, relationship etc), ask about history, track record, turnover, where they view themselves vs competitors (compet. adv) 5) willingness to work hard, intelligence, experience in finance/accting/legal, experience in diligence, poise, presentability 6) doubt anyone will care but can use it as a showcase as to how much you like finance i guess
these are v good points, thank you. what does make a good lbo candidate? growth potential in the near future, cash flow rich, what else? what kind of legal and diligence experience would they be looking for? thx
bm_chicago Wrote: ------------------------------------------------------- > these are v good points, thank you. > what does make a good lbo candidate? growth > potential in the near future, cash flow rich, what > else? > > what kind of legal and diligence experience would > they be looking for? > > thx use the search function. i’ve written about this in several other posts previously other than that, agreed with bankingbaby. they will not likely not about the CFA unless you have no other relevant work exp
numi, are you still pursuing the CFA designation?
what makes a good lbo candidate - there have been many books/articles/speeches on exactly this subject and i would strongly encourage you to read them. the 3 biggest drivers that will affect returns are -what’s your entry multiple -what’s your exit multiple -how much does EBITDA grow so - what you are looking for? the rest of these are broad generalizations and in a perfect world you would have all, but in reality all you need is 2 or 3 to have a significant impact on returns and juice your irr -stability and predictability of cash flows (to support leverage) -business that is currently trading below its peers, and peers/itself on a historical basis -business/industry that is out of favor or public markets don’t get/like -ability to delever quickly (low capex, low wc needs, low cash taxes, high margins) -currently underlevered (so leverage can be employed as value creation/discipline) -great management or terrible management that can be replaced -potential for restructuring (sale of non-core assets) -leveragable assets -defensible position within industry -good exit plan (asset of strategic importance to other industry acquirors, public will like as a roll up plan, etc.)
billwest Wrote: ------------------------------------------------------- > numi, are you still pursuing the CFA designation? billwest – not for the foreseeable future. i don’t need the CFA designation and don’t have the time. you? also, in addition to what bankingbaby mentioned, you should also spend time browsing websites of some private equity firms and look at their investment approach/strategy…a lot of times firms will talk about how they have a differentiated approach, but (1) PE is becoming way too efficient for everyone to have a differentiated point of view about investing, and sometimes it’s more about which firms does what they do better than the others; and (2) as bankingbaby described, a lot of the things you find in an attractive buyout candidate are desired by all firms and so as you see certain traits coming up time and time again, you’ll realize that these are the basic characteristics that most buyout shops will look for
neither am i, don’t have the time.
Thank you man, these are awesome points… and a very neat way to structure my answers…! thank you again
a buddy of mine just got a PE gig, transfering internally within his company from another area. he said the level III material on PE was actually really helpful in preparing for the interview, and he was asked questions where he essentially repeated some of the material verbatim from the book. i’m not sure which study session that stuff is in this year…
guys, thank you for your assistance. the interview was with an associate and principal. very very relaxed. the material on AF was very helpful, including the posts on this thread. clearly, the most impt thing was understanding what private equity is about, and what they expect you to know. bankingbaby and numi, thank you for your inputs. jeff_s, thanks for the level3 reference. will have to look into that…
no problem dude. let me know how things go. glad you had a relaxing experience, and yes the most important things that come up is that (1) you understand what private equity is, (2) you have reasonable expectations for what you would be doing as an associate, and (3) you know what characterizes a good controlling interest investment (which bankingbaby did a fine job highlighting above). if you feel like you’ve conveyed these points in the interview and that you hit it off on a personal level, i think you would have done fine. how did things go? care to elaborate on the questions you got, how things went, what questions you asked them after your interview, etc.? were you able to find the posts i made previously on the topics of PE and LBO?
the interview was v short, 40 mins per guy, and we mostly talked through my resume. one needs to come up with a good explanation with why you changed jobs and why you think PE is right for you. They asked me about my experience in the jobs I had and how they were different. I was in IBD and now in Consulting. So I spoke about the different benefits of both (analytical and modeling vs. big picture, competitive landscape, handling management expectations, etc). I spoke about my exposure to senior management, working with CEOs and CFOs, etc. We went into a little bit of technical, which was all fine considering I know my banking stuff cold. I asked about the role of the associate at a pe firm like theirs, the associate-principal interaction, the important values looked for in the management of a target company, what makes for a good lbo candidate, and finally, what goes on in their weekly investment committee meeting (and how involved is the associate in it). I also brought up their latest deal, spoke about the intricacies of the deal, where I could see they might be able to realize more value in the future. I will find out if I have final rounds by mid-December, which is an awfully long wait, but the response and the agreeing signs I got from the Principal makes me comfortable with how it went. We did also talk about where I see myself in 3-5 years, but that i was one question, which I am not sure I said any different from the usual (want to be here, settle down in the city, no plans of jet-setting of for an MBA in the future, etc). I had a lot more to say, considering I did sufficient research, but I felt if I brought up more, I would only stand to lose or dis-interest them. Some times it better to cut short when you know youre ahead.
sounds like things went pretty swimmingly…to tell you the truth, i was a bit surprised by the questions you asked initially about what to expect in a PE interview. i would have figured that if you came from a banking background, you would have had a sense about what all that stuff was about…but anyway, no big deal, sounds like the interviews were handled well and it’d probably come down to whether they thought you were a good fit. one thing i was curious about – you actually talked about a deal they did? how would you know the intricacies? what were you actually able to comment on? i’ve generally felt by talking about a deal that a PE firm did on might be a bit of a dicey situation because you can’t possibly know what it would really have been like to work on it, and in many cases, firms don’t even publicize much about the transaction…i’m curious to know what exactly you meant mid-december is a bit of a long wait, yes, but then again PE recruiting at this time has been really slow…i guess you just have to bear with it. just make sure you keep yourself on their radar and reiterate your interest every so often. keep us posted!
Yeah, i have banking experience, but its been 2 years since. I try to keep in touch with the financing market by reading lending reports, etc. Also, i know what I know about PE, but who am I kidding, I was a kid when I was first interviewing with PE shops… I was interviewing in 2005 and I was so fascinated by it coz I didnt know anything more. I didnt do PE coz I couldnt convince myself to do it. Instead I took the CFA route and learnt some more of finance (mind you, I wasnt a finance major in collg). Last, I respect the posters here on AF, including yourself, and youve all had great suggestions. If you knew how I was, you would know that I would rather have too much information than not exhaust all sources before any important event…be it a cfa exam or a pe interview 
last, i might have been an analyst, but i couldnt have put together answers like bankingbaby did…some times you know what youre talking about, but youre just not precise like he/she was. regarding the deal, I concentrated on post transaction items. Yes, all the transaction details are confidential, but not the appointment of a new CEO and I saw a posting where they were looking for bolt ons for their other portfolio cos. I just added things together and asked them whether they were behind the new hiring and whether they have an acquisitory strategy for the company…
right…a lot of the time it’s important to be able to see the big picture of a transaction or an investment opportunity, and a lot of times, analysts can get caught up in a very small part of the deal they’re working on and lose sense of what the “big picture” is. i appreciate your elaborating on your background and i definitely agree that it’s better to be prepared than not. you have to figure that anyone serious about getting into PE has done extensive preparation. sounds like you honed in on the right things regarding a deal that you saw…that’s the type of stuff that PE firms like to talk about on their websites so it’s safe to bring it up if it eases its way into a conversation. i just thought it was a situation where they actually asked you to tell them about a deal they’d worked on, and even though headhunters always tell you to be prepared for this question, i don’t think it ever really comes up. it really is a pretty loaded question to ask someone outside the firm what they thought about a deal that they worked on.
i brought up their last transaction i wanted to… i had some interesting points to go over with them, and i had to make sure that I led during the interview, not them i was interviewing with another vc firm and they also brought up their last deal. again, no specifics, but they asked me what other markets could the start up sell its products in? i think it was some sort of a wireless thing, and we spoke about different industries, from govt, military, to bunching various products together, etc. the markets are terrible right now, no one in NY wants to fly in a candidate from else where, etc. everyone is waiting for their 4th Q results before increasing their payroll. well, this is just the beginning of my job search, hopefully i will learn more and be able to adapt to the beast…
^ To get information on any pending or closed merger transaction where a shareholder vote is required to consummate the deal, the buyer/target typically publishes SEC approved merger proxy statements (aka prospectus) prior to the special proxy meeting where the SH’s vote “for” or “against” the merger. The merger proxy is typically filed as DEFM14A, PREM14A, and sometimes it’s part of Form 8-K. For a take private transaction, of course all public reports are no longer available after closing, so you have to get the DEFM quick before stock delisting. The DEFM spells out anything you need to know about any transaction where a definitive merger agreement needs to be signed. Merg-arb funds and their traders scour these documents and other credit documents to assess the likelyhood of the deal actually closing.
he’s talking about a private deal - not a P2P. And to be nit picky - could also be done via a tender so the filing would be a Schedule TO-T versus a merger proxy. And for a true going private, it would be a 13E3.
thanks wessun and bankingbaby… i didnt know this.