Cracking the ‘Why Private Equity’ Interview Question: Strategies & Sample Answers

The ‘Why Private Equity’ interview question is a right of passage for anyone prepping for private equity recruiting.

While it’s a check-the-box question, there are still good answers and bad answers. And, if your answer is particularly bad, you could get yourself dinged from the process before it’s even begun.

In this article we’ll discuss strategies to not only nail the ‘Why PE’ question, but also leverage it as an opportunity to drive him the point that you’re a strong candidate.

Don’t get dinged

The most important thing is not to get yourself sent home early because you had a terrible answer. A lot of this is common sense, but is still worth covering.

There are a couple things you should make sure you don’t say..

• That you’re excited to move to private equity because it has a better work life balance and fewer hours than investment banking
• Or that you’re excited to move to private equity because you’ll make a ton more money

Both of these answers are probably not true at the junior level, and also tell your interviewer that you’re interested in PE for the wrong reasons.

They’ll question your appetite for sticking with it through unpleasant stretches of work. It’s a lot easier to stomach the terrible parts of PE if you’re in it because you like investing or the deal process, vs. doing it because you’re looking for a big paycheck.

Don’t get me wrong, these can be great reasons to join PE (if you find the holy grail firm where they’re true), but are still not something you should say in an interview.

You want to be an investor

Now that we’ve got what not to say out of the way, let’s move on to what you should say.

The biggest hurdle in the private equity recruiting process is convincing your interviewers that you have the ability to think like an investor. They want someone who can critically evaluate new deals and provide meaningful contribution in diligence processes, modeling exercises, and, eventually, investment committee.

A great first step in convincing your interviewers of this is to incorporate it into your ‘Why Private Equity’ answer.

Many investment banking analysts and consultants don’t fully grasp the importance of this point (given how early you are in your career), so it’s an opportunity to set yourself apart from the rest of the field.

The best answers to this interview question will incorporate the idea that your interest in private equity is linked to your desire to become an investor and the enjoyment you get from in-depth analysis of investment opportunities.

The key with this, and most difficult part, is to relay this message without sounding like a hardo who memorized the interview guide. Read on…

You had prior exposure and enjoyed it

This next step can both soften the cringe factor (from the prior point) while also further demonstrating your attractiveness as a candidate.

You’ll want to emphasize that your enjoyment of investing is rooted in concrete prior experience. This makes it more believable, makes you sound less weird, and is an opportunity to position yourself in the best possible light.

In an absolutely ideal world, you would have had experience as an investment banking analyst with a buy-side mandate working with a private equity firm evaluating a new deal. Or, you would have completed a prior internship at a private equity firm.

But, actually having one of these experiences so early in your career can be relatively rare.

That’s totally fine, but use them as a benchmark for you to craft your story around. You should aim to come up with a relevant experience that mirrors these scenarios as closely as possible.

The idea is to demonstrate you’ve had prior private equity exposure, loved the work, and thus would enjoy nothing more than cranking on LBOs and building a career in private equity.

Other opportunities you can use as the basis for your story could include…

Here are some potential supporting experiences you can reference:

• Sell-side on a sponsor’s portfolio company – was able to interface with the PE firm, understand their thesis going into the deal, and get a view of the final outcome, all of which made you want to pursue PE
• Sell-side on a company with private equity bidders – was able to interface with multiple PE firms, hear their investment theses, and get a first-hand look at the in-depth diligence they completed to prove out their thinking (all of which, again, made you want to pursue PE)
• Had great experience in your undergraduate investment club, but love the in-the-weeds process-oriented nature of investment banking, and think private equity would be the perfect combination

There are any number of other examples or tweaks you can make to get a story that fits your unique situation and prior experience. The two critical things you want to accomplish are showing a genuine interest in investing, and that private equity, specifically, is the type of investing you most want to do.

This is important, because you don’t want to leave any ambiguity in your answer about whether you would be equally as happy at a hedge fund or in venture capital. You need to specifically call out private equity as your investing style of choice.

How to make it private equity specific…

If you’re struggling to think of a way to position your love of investing toward private equity, here are a couple potential approaches (mirroring what is mentioned above):

• You think private markets investing offers an opportunity to truly evaluate companies at a granular level, and in a way that isn’t possible in the public markets
• You are drawn to the process of executing an investment thesis over a prolonged hold period, rather than the short-term trading endemic in public markets investing
• You love the deal process and the unique opportunity it provides to generate returns, taking advantage of various opportunities that wouldn’t be available in a more efficient public market (proprietary sourcing, unique structuring, exploiting poorly run processes, employing bid strategies like front-running, etc.)
• You love the opportunity for more hands-on value creation over the longer term, principally through things like add-on acquisitions and process or operational improvements, none of which would be possible in the public markets

How to structure your why private equity answer

The most important thing to keep in mind while you draft the actual wording of your answer for the ‘Why Private Equity’ interview question is that you must be concise.

You don’t want to ramble because it both dilutes your message and shows a lack of polish.

Outline your key reason, back it up with 1 – 2 supporting points, and then let your interviewer ask any follow up questions, if they want. Your entire answer should be delivered within 30 seconds.

Make sure you practice before you need to whip out your answer in an actual interview. Grab a friend and rehearse your until you’re able to hit on every point while also keeping your message short and succinct.

Sample answers to the ‘Why Private Equity’ interview question

Check out a couple sample answers to help you craft your own ‘Why PE’ response. Leverage these frameworks and slot in your own experiences and supporting evidence.

I’m excited to work in private equity because of the opportunity to be an active investor over the longer-term. During my summer internship I was lucky enough to work on a buy-side deal with a sponsor’s PortCo that was executing a hot dog stand roll-up strategy.

My prior experience in my undergrad public fund was great, but seeing the sponsor’s hands-on playbook made me realize how impactful a more involved approach to value creation can be. To me it’s something that’s both more exciting and a more compelling way to invest, so I think private equity would be a great fit.

In my summer analyst stint I was lucky enough to work on the sale of Toys “R” Us. We had a number of sponsors in the process and it offered an incredible view into the depth and intensity of their diligence.

The ability to get so granular to prove out an investment thesis is very exciting to me, especially after how high-level my prior hedge fund internship was. The whole Toys “R” Us experience really made me realize how much I would enjoy a career in private equity, so I’ve been focused on making the move ever since.

While both of these answers would make you sound like a massive nerd, they also have real content and meaning. That’s a big difference vs. most candidate responses that are bland, generic, and won’t really get you anywhere.

Take the time to come up with your own version and you’ll be golden – ‘Why Private Equity’ is a basic, early-stage interview question, but you might as well make the most of it.