The Private Equity Recruiting Process Explained

The private equity recruiting process is a mess. It’s probably one of strangest ways to hire top talent than any industry has thought up.

But, unfortunately, if you’re interested in private equity you have no choice but to partake. In this article we’ll break everything down so you know what you’re getting yourself into and you know how to come out on top.

Prerequisites

One of the most frustrating things about private equity recruiting is the rigid criteria for candidate profiles. Particularly for the on-cycle process (which we’ll cover below), you’re essentially required to be either an investment banking analyst or a private equity analyst, with some room for top management consultants.

If you don’t fit this profile, you won’t participate in on-cycle recruiting. You may have an opportunity to break in through the less structured off-cycle recruiting, but your chances are still extremely small. Check out our other guide on how to get into private equity, including a few options for prospective candidates that don’t fit the traditional profile.

Headhunters

Part of what makes the private equity recruiting process unique is the presence of headhunters. Unlike most normal jobs, you can’t actually fill out a private equity job application. There’s no online portal, and your university’s career development office most certainly can’t point you in the right direction.

Instead, private equity funds used specialized recruitment firms, known as headhunters. These headhunters will handle candidate sourcing, initial vetting, and all process logistics.

They make the decision on who is able to interview, and generally hold an incredible amount of power over the entire process.

For their services, they’re paid based on a percentage of first-year compensation for successfully placed candidates, usually one-third.

The Main Characters

There are only a few major headhunters who represent the leading private equity firms in the United States and Canada for the pre-MBA private equity recruiting process. They are (along with a few clients) as follows:

• CPI
• Henkel Search Partners
• Amity
• Ratio Advisors
• Bellcast
• CarterPierce
• SG Partners
• Dynamics Search Partners
• Oxbridge
• Gold Coast

Check out our headhunter coverage guide to see client lists for each of the top firms.

Initial Headhunter Meetings

When new investment banking analysts hit the desks, headhunters will begin their initial outreach. Yes, you read that right — hiring for the next job starts almost before you finish training at your current job.

They’ll send emails to first year analysts to gather data, starting to build each person’s profile. Typically, you’ll give them your preference on firm type (middle market or large cap.), investing style (buyout, VC, growth, public markets), and geographic location.

Within a couple weeks of this outreach, the headhunters will start scheduling 30-minute in-person chats with each candidate.

Prospective interviewees will set up times for each of the top firms and start sneaking out of work to tick them off, one by one.

Essentially, the purpose of this initial meeting is to see what level of candidate you are. It’s a first round interview and the headhunters will be evaluating you throughout the conversation.

It can be disarming because most headhunters are friendly, warm, and conversational, but they’re still ranking you against everyone else they meet with.

Common topics of conversation will be your background, choice of school, interest in banking and private equity, choice of bank and group, and medium-term career goals.

Make sure your specific in your answers, particularly around the type of firm you want to target. For example, say “I’m interested in large cap, buyout private equity in New York.” Do not say “I like my current industrials group, but healthcare is cool too, and so is consumer. Large cap. sponsor coverage in banking is great and I also like the idea of VC exposure, so of course that means growth equity could be a good middle ground too.”

You don’t get points for being open to more opportunities. It actually signals to the headhunter that you don’t know what you want and will have a lower probability of converting than a more certain candidate.

Following these meetings, the headhunters will assess the pool of candidates and determine who will get shown opportunities at which firms.

Strong candidates with great backgrounds who showed well will have their pick of opportunities. Others with less desirable undergraduate and banking pedigrees, or who may not have shown well, will see fewer opportunities.

Generally, recruiting from the top banks will allow you to interview where you please, while recruiting from middle market banks will restrict you to middle market and lower middle market private equity.

The name of the game is placing strong candidates in seats, and if the headhunter doesn’t make that happen, they may not be that firm’s headhunter for much longer.

On-Cycle Recruiting

On-cycle is the most intense period in the private equity recruiting process. This is where you hear about 20-year old kids doing case studies at 3 in the morning so that they can lock up their $400k job 2 years in the future.

There are a limited number of top tier candidates (on paper), and every private equity firm wants the best. This means that when one firm kicks off interviews, all the others immediately follow to avoid losing out.

Typically, the on-cycle process is dominated by megafunds and upper middle market firms. These are the handful of the world’s largest funds and are the most competitive to get into. Middle market and lower middle market firms will focus more on the lengthier off-cycle recruiting timeline.

Usually one firm will decide to go ahead and will let their headhunter know. Other firms will catch wind, and then the frenzy begins. No one knows the exact timing in advance, but you’ll start to hear rumors and guesstimates in the weeks leading up to launch.

Kicking Off

When this happens, candidates will receive calls from headhunters letting them know which firms are interested in speaking with them. You won’t get a heads up or an opportunity to schedule in advance. You’ll need to be ready at a moment’s notice.

These calls might come during the day, but are equally likely to come in the middle of the night or on a weekend. Best not to put your phone on silent for a little bit, or you might find that you’ve slept through a process.
The entire process, from the start of interviews to the time offers are extended, may be as short as an evening. Be prepared to interview at any time. The largest firms will fill their on-cycle seats within a few days, often less. The remainder of upper middle market firms will wrap up within a week or two.

The Interview

Up to this point, we’ve spent the entire article talking about how to even get an interview. Now we can talk about what actually happens if you’re able to manage that.

Each firm has a different structure, but you’ll generally have a first round interview (potentially with a paper LBO), a modeling test and/or case study, and a final round or two with senior members of the firm.

Usually, if you fail any step of the way you’ll be asked to leave, with the whole process turning into a sort of last man standing marathon.
If you make it through the gauntlet, you’ll get an offer almost immediately after completion of the interview process. After you get this offer, you’ll probably have less than 24-hours to accept or decline.

Things become tricky if you’re not enthralled with your first offer, but you also don’t want to risk continuing to recruit in case you don’t land anything else at the same level. You’ll also be pressured by headhunters to accept, even if it’s not a great fit (remember, that’s how they get paid).

To help mitigate some of the insanity, it’s helpful to have a ranking of your top choices going into on-cycle. You should have done enough research to know firms that you would absolutely accept, places you won’t take an interview, and then a middle group that you can play by ear.

While it’s not fun while it lasts, at least it’s over quickly. If you successfully navigate on-cycle, you’re all done with the stress and preparation. You can relax through your next two years in investment banking as you wait to start at your new firm.

Off-Cycle Recruiting

The off-cycle private equity recruiting process starts when on-cycle ends, though there may be a slight lull in-between. It continues for the remainder of your analyst years.

Historically, off-cycle recruiting has been all about middle market firms. It’s their chance to pick up candidates after the megafund on-cycle frenzy dies down.

Increasingly, megafunds and upper middle market firms are holding back available seats to participate in off-cycle as well as on-cycle. The pace of today’s recruiting timeline means more and more candidates don’t feel ready to interview so soon, and firms are beginning to recognize that there are advantages to delaying.

This means that there are a huge number of opportunities still up for grabs. The catch, however, is that the interview process itself does become more challenging.

Instead of a single night, you’ll now interview over a number of weeks. There’s less time pressure, and firms can really put you through your paces.

You’ll be more likely to have multiple first rounds, a full model test and take home case study, and an in-person superday or multiple senior-level interviews.

It’s a great chance to meet more of the team and ensure the firm is a good fit for you. But this works both ways – firms are also able to take their time and pick and choose among candidates.

If you’re interviewing for off-cycle positions in your first year as an analyst, they’ll typically be for a start date after you’ve completed two years of banking. If you’re interviewing as a second year, start dates can range from two years in the future (meaning you have three total years in banking) to an immediate hire.

I’ve also seen situations where someone will sign an offer for the following year, only to get asked to start immediately by the private equity firm due to associate turnover.

Breaking In

Off-cycle recruiting is going to be the best chance for candidates with non-traditional or less than stellar profiles. Processes are less regimented, headhunters are more open to looking beyond cookie cutter candidates, and lower middle market private equity firms conduct all of their recruiting off-cycle.

Don’t expect to waltz into a seat after managing your hometown’s McDonald’s, but you may be able to get some looks from tier II consulting firms, smaller middle market and boutique investment banks, and potentially from places like public markets investing or sell-side capital markets roles.

In particular, lower middle market firms will have much more flexibility with the type of candidate they hire. If they like you and you’re smart, you have a good shot. Even if you didn’t graduate with a 3.9 from Wharton and head straight to Evercore.

With headhunters holding less power, you’ll also have quite a bit more luck with networking efforts. Solid outreach can get you in a process you otherwise wouldn’t have, and can even preempt processes in some cases.

It’s an uphill battle if you’re a less than traditional candidate, but certainly not impossible. Check out this article on breaking into private equity for more thoughts on outside-the-box approaches.

The Final Word

It’s a chaotic process from start to finish, but that’s what you’ve got to work with if you’re at all interested in private equity. All you can do is get prepared and hang on tight.

Don’t worry if things don’t fall into place for you right away. There are plenty of opportunities and you’ll have plenty of chances to make the jump to the buy-side.