Getting into Private Equity from a Middle Market | M & I (2022)

Getting into Private Equity from a Middle Market | M & I (1)

A long time ago, I realized that 98.2% of this site’s readers had the same career goal: Get into private equity.

Unfortunately, your chances are quite low unless you’re at a bulge-bracket or elite-boutique bank… in the right group… with the right deal experience… with the right academic credentials… and you start insanely early.

But there are ways to beat the odds.

Our reader today won a private equity role coming from a middle-market/boutique bank – even though he started the recruiting process late and came from a non-traditional background.

Here’s how he did it, and how you could do the same:

Private Equity Recruiting: Unstoppable Force Meets Immovable Object

Q: Can you walk us through your story?

A: Sure. I had moved into investment banking from an accounting role, and I spent a year working at a boutique/middle-market firm.

After my first year, I began looking for buy-side roles and reaching out to recruiters.

Six months into that, I had received almost no interest from headhunters, so I began to do things on my own.

I contacted “bank alumni” who were in private equity, made lists of PE firms using Capital IQ, and used LinkedIn to find Associates at those firms.

Over a 6-month period, I contacted ~100 firms, received responses from a few dozen, and went through the interview process at 5-10 firms.

I won an offer from a relatively new private equity firm right as my second year in investment banking was ending, and I joined the firm soon after.

In banking, I had been promoted early to the Associate level (under two years vs. the normal pace of three years).

I made sure to point that out in all my PE interviews, and it definitely helped.

(Video) Finding Value in Lower Middle Market Private Equity

Q: Great. How did you screen for firms to contact?

A: At first, I didn’t apply much of a screen: I just looked up firms and barely paid attention to their strategies, industries, or locations.

But I quickly realized that industry focus was incredibly important.

I had worked in a fairly “generalist” group in banking (think: technology, consumer/retail, industrials, etc.), and many PE firms invested in my industry.

So, I began to screen for firms by industry focus, and I had some connection (industry, accounting background, etc.) with ~50% of the firms I contacted.

Q: OK. How did you decide who to contact at each firm, and what did you say to them?

A: I focused on people who had attended non-target schools or worked at lower-ranked banks and still made it into PE.

In 99% of cases, they were more responsive than professionals who had followed the Ivy-League-to-Goldman-Sachs-to-private-equity path.

Finding email addresses was straightforward because most small firms list everyone on their websites; if I couldn’t find someone’s address, I guessed variations like FirstName.LastName@CompanyName.com.

I made each email very specific, often citing parts of the person’s LinkedIn profile and pointing out what we had in common.

I always asked for advice instead of job openings or interviews. In a typical email, I might have written something like:

“I see you also attended [Non-Target School] and worked at [Boutique Bank], similar to me (I’m currently an Analyst at [Bank X]). Do you have any advice on how someone like me might get into private equity?”

I asked for a few minutes of the person’s time, and if he/she agreed to a call, I always made an “ask” at the end of each conversation.

For example, I might have asked the person to review my resume, send me practice case studies, or tell me about open positions.

Q: So, what was the most difficult part of this process? It sounds… straightforward.

A: The hardest part was balancing all this networking with my full-time role in IB – that’s why I always started by emailing the person rather than calling him/her.

(Video) Advice For Middle-Market Recruiting - Private Equity Panel, Goldman, Ares, Blackstone, Shore & Huron

Most people simply didn’t reply, so it was a numbers game more than anything.

“Competitive tension,” i.e., showing that I was speaking or interviewing with other PE firms, wasn’t that important when I was networking, but it became extremely important in interviews.

The firm that hired me did so only because of a recommendation from another firm!

Private equity is a small world, so it’s critical to maintain positive relationships with people you met and impressed during the process, even if you did not win an offer at their firm(s).

If I did not win an offer, I always scheduled a follow-up call to request feedback and to ask about other firms that might have been hiring.

Private Equity Interviews: How to Prepare

Q: OK, fair enough.

I’ve written before that the major topics in PE interviews are “fit” questions, technical questions, deal discussions, and models/case studies.

I’ve also said that most people tend to over-prepare for models/case studies and under-prepare for deal discussions.

What do you think of that assessment?

A: I generally agree with both statements, but I’d also say that you have to expect technical questions much earlier than you might think.

In my first phone interview, the person asked me a paper LBO modeling question, and I wasn’t prepared for that at all.

And then in my next interview, I wasn’t prepared to answer detailed questions about my deals – for example, they asked about the market sizes of individual companies, and I didn’t have numbers to that level of detail.

“Fit” questions are still important because most private equity firms are small, and firms that use off-cycle recruiting are even smaller.

But they’re a bit less important than they are in banking because you’re expected to operate more independently in PE.

They did not ask me about markets or companies I would hypothetically invest in – they focused on my deal experience, and a few firms asked me to discuss their portfolio companies.

(Video) Sam Imbeault Private Equity Group Management and Investment Methods Mid Market Business

Q: How can you prepare effectively for deal discussions?

A: Beyond the numbers, you need to know the markets, products, and management teams quite well.

Coming from a smaller bank can give you an advantage because you’ll tend to know more about the qualitative aspects.

You must have a good response to the “Would you invest in this company?” question because they’ll ask you that for each of your deals.

They cared less about my contributions and more about my “critical view” of each deal from the perspective of an investor.

Before you go into interviews, create an “investor’s outline” of each deal with these points:

  • Would you invest in this company’s equity/debt (for ECM/DCM deals) or acquire it (for M&A and LBO deals)?
  • Which numbers/financial criteria support your decision (e.g., the IRR in an LBO or valuation in an equity deal), and how do they differ in different cases?
  • Which qualitative factors support your decision?
  • If you would invest, what are the key risk factors, and how could you mitigate them? If you would not invest, what might change your mind?

Q: OK, great.

With case studies and modeling tests, the main categories seem to be “paper LBOs,” 2-3-hour on-site case studies, and take-home case studies.

What did you encounter in interviews, and do you have any tips?

A: I would split the “paper LBO” category into two because sometimes you can write down the numbers and sometimes you can’t (see: a paper LBO example where you can write down the numbers).

You have to be very quick with IRR approximations in both, but with the first category, you must also be good at simplifying the calculations and rounding numbers such as the interest expense to 5’s and 10’s.

I did not receive any 2-3-hour on-site case studies, but that was expected because they’re more common in on-cycle interviews at mid-sized-to-large firms.

I received ~6 take-home case studies throughout the process, and I had 3-4 days up to a week to complete each one.

My #1 tip is to fit your recommendation to the firm’s investment thesis rather than getting carried away with a complex model.

For example, if you have one week to complete the case study, and the firm focuses on “roll-up” deals in the technology industry, don’t waste time building a 5,000-row LBO model that supports 10 tranches of debt with dozens of financing scenarios.

Instead, spend your time researching potential bolt-on acquisitions in the sector and build a relatively simple model that incorporates them (e.g., make it on a cash-free debt-free basis).

(Video) Paths to Private Equity: Middle Market Banking to Harvard Business School and Megafund (Full Video)

Then, focus on how the deal fits into or does not fit into the firm’s strategy when you make your presentation.

Model complexity matters less in take-home case studies because smaller firms tend to rely less on financial engineering, and they pay a lot more attention to your verbal presentation than your Excel files.

Mistakes, Second Chances, and Advice to Others

Q: Thanks for that summary.

Looking back on the process, is there anything you would have done differently, besides being more proactive from the start?

A: I would have focused far more on firms that matched my industry.

I did win a few interviews at firms that didn’t match, but there was a night-and-day difference in my success rate at firms that matched.

Also, I would have spent more time preparing for my deal discussions and creating an “investment recommendation” for each one.

Q: What advice would you give to readers at middle-market and boutique banks who want private equity careers?

A:First, it’s not the end of the world if you start recruiting at a later stage than others. On-cycle recruiting at bulge-bracket banks is highly structured and starts very early, but off-cycle recruiting is more random.

Being more experienced helped me stand out, especially since I came from a non-bulge-bracket bank. People appreciate the maturity and work ethic when they hire a more experienced candidate.

Recruiters will tell you that the “PE recruiting clock” starts ticking once you become an Associate, so I did feel some pressure.

But people in the industry seemed to be open to Associates who had reasonable stories (e.g., early promotions, lateral moves to larger banks, industry switchers, etc.).

So, if you’ve followed an unconventional path into the industry, that can also be a strength – even though it might be a weakness in on-cycle recruiting.

Also, play up your strengths about the hands-on client experience you receive and your industry and market knowledge. Don’t position yourself as a technical or modeling expert, as most small firms care less about those points.

Finally, you must be proactive and do a ton of networking on your own, including cold emails.

(Video) Five Ways Private Equity Firms Win Deals in a Crowded Mid Market

You cannot rely on headhunters, or you’ll never get anywhere.

Q: Great. Thanks for your time!

A: My pleasure.

FAQs

How hard is it to get into private equity? ›

Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.

What is middle market private equity? ›

Middle market private equity refers to the sector of private equity businesses that invest in companies worth between $50 million and $500 million. Companies in this range tend to be well-established, without the risks of investing in a small startup.

What is the best way to get into private equity? ›

The most common way to get into private equity is via investment banking. Those working in finance move into private equity because it offers many attractions, including: Interesting and sociable work as your team analyse a variety of different industries.

How many interviews do you need for private equity? ›

Private equity or leveraged-buyout funds usually conduct three to four rounds of interviews. For junior positions, however, the interview rounds could sometimes be as few as two.

Is private equity a stressful job? ›

It's extremely difficult to get into private equity, and once you're in, the job is stressful and requires long hours and sacrifices, especially when deals are in their final stages.

How big is a middle market PE fund? ›

So, our definition will be: Middle Market Private Equity Definition: Middle market private equity firms typically acquire companies for purchase prices between $50 and $500 million and use leverage in deals but tend to focus more on growth and operational improvements.

How many mid-market PE firms are there? ›

There are around 200,000 companies in the middle market — more than a quarter of which are PE-owned — that provide more than 30 million American jobs. Middle market investors seek out “little leading” companies that are ripe for growth and innovation, and help them expand and create jobs.

What Ebitda is middle market? ›

EBITDA=$5,000,000 to $10,000,000

By definition, this level of EBITDA could be truly deemed “the middle market.” Most would consider anything below the $10M EBITDA size range as “lower” middle-market.

How can I impress in private equity interview? ›

Good answers suggest to the interviewer what you can bring to the company. Check out recent deals, target companies, and say something that shows a genuine interest in the company you want to work for. “Summarize your experience in the context of their firm – why are you going to be useful to them?” advises McManus.

What skills does private equity need? ›

There are a number of key skills that the most successful players in the private equity business have in common.
...
Key Skills for Succeeding in Private Equity Jobs
  • Financial modeling.
  • LBO modeling.
  • M&A modeling.
  • General financial analysis.
29 Mar 2021

How hard is it to become a VP in private equity? ›

It's quite difficult to get promoted to VP because the nature of the job changes a fair amount at that level. Many Associates and Senior Associates at larger PE firms realize there is no great path to VP there, so they end up going downmarket to advance.

How do you ace a Superday interview? ›

Top 10 tips for a successful Superday

Rehearse your answers to the most common investment banking interview questions. Research the bank and understand what makes them unique, the deals they've worked on, and their culture. Network with professionals at the bank before and during the event as much as possible.

Do private equity Internships look good on your resume? ›

It looks highly relevant – Private equity is the next-best experience to have after banking if your post-graduation goal is banking. Even if you do little real work, writing “Private Equity Intern” on your resume or CV will give you a huge boost.

What questions are asked in a PE interview? ›

Fund strategy & positioning
  • How many funds and/or product lines does the firm operate? ...
  • Which kind of assets does the company invest in? ...
  • What is the fund's investment strategy? ...
  • What is the size of the fund? ...
  • Which stage of the company's lifecycle does the fund invest in? ...
  • Where is the fund present?

How much does a VP in private equity make? ›

Salary Ranges for Vice President, Private Equities

The salaries of Vice President, Private Equities in the US range from $200,000 to $400,000 , with a median salary of $349,000 . The middle 67% of Vice President, Private Equities makes $349,000, with the top 67% making $400,000.

How much does the average person in private equity make? ›

For the vast majority of private equity associates, the base salary is around $135k-$155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

What percentage of candidates get interviews? ›

Whenever you apply for a job, it's only natural to have some competition. The average number of people who tend to apply for a single job is 118, while only 20% of them get to be interviewed. So, next time you're wondering how many applicants get interviews, know that it's only 1 in 7.

Do you have to be smart to work in private equity? ›

Candidates should have an bachelor's degree in an analytical major like finance, accounting, statistics, mathematics, or economics. Private equity fund management requires technical ability to analyze financial performance and estimate the value of a private company.

How many hours do private equity people work? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

How many hours a week do people in private equity work? ›

People in private equity are older, more professional and tend to have young families, so most people care about having good weekends. When you're in the heat of a live deal, you'll most likely be working 80+ hours per week.

What is considered upper middle market PE? ›

The middle market is further broken down into the lower middle market (LMM; $25 million to $100 million), the core middle market (CMM; $100 million to $500 million) and the upper middle market (UMM; $500 million to $1 billion).

Why middle market is better than bulge bracket? ›

The biggest difference between middle markets and bulge brackets lies in the average deal size: middle markets handle deals worth from $10M to $500M while massive bulge brackets tend to focus on the largest projects, usually over $1B in value, though they may go lower depending on the market.

What is the average AUM for private equity? ›

The distribution of fund AuM tends to center around $100 – $250 million, with a median fund size of $65 million.

What is the largest PE firm in the world? ›

Private equity firms are typically ranked by their assets under management (AUM) and success in returning gains to investors. The Blackstone Group Inc. had the most AUM out of any private equity firm in 2021.

How much do partners at PE firms make? ›

Managing partners pulled in $1.59 million, on average, at small private equity firms, while partners and managing directors averaged $985,000 in salary and bonuses. For firms with $2 billion to $3.99 billion in assets, top bosses made $2.25 million, and partners and managing directors averaged about $1 million.

Is Goldman Sachs a PE? ›

Goldman Sachs Private Equity Group operates as a private equity fund.

Is Goldman Sachs middle market? ›

ABOUT GOLDMAN SACHS BDC, INC.

(“Goldman Sachs”) to invest primarily in middle-market companies in the United States, and is externally managed by Goldman Sachs Asset Management, L.P., an SEC-registered investment adviser and a wholly-owned subsidiary of Goldman Sachs.

What is higher than middle market? ›

The upper middle market is a market consisting of firms that earn revenues between $500 million to $1 billion. They make up a relatively small percentage (1%) of the overall market compared to the middle market.

Is 5x revenue good valuation? ›

What the chart says is this: The 5x base value assumes the company has a stable history of performance and has no significant blemishes. A stable financial performance is the most basic component, the foundation of a valuation.

Why do you want to work for US private equity? ›

Express an interest in a sector that the PE firm invests in. Position yourself as a long-term thinker or investor. Show that you know what the PE firm has invested in. Express a desire to work with portfolio companies to create value.

How can I impress the interviewer with answers? ›

How can I impress the interviewer with my answers?
  1. Be passionate. Have a positive attitude and be enthusiastic when talking about yourself and your career. ...
  2. Sell yourself. ...
  3. Tell stories. ...
  4. Ask questions. ...
  5. Ask for the job.

What do people in private equity actually do? ›

What Do You Actually Do In A Private Equity Job? Private equity firms raise capital from outside investors, called Limited Partners (LP), and then use this capital to buy companies, operate and improve them, and then sell them to realize a return on their investment.

What makes private equity attractive? ›

Unlike public markets, a private market investor can have information advantages, such as access to management and greater visibility into a potential portfolio company. Private equity is an inefficient market compared to public markets, and thus provides additional opportunities for attractive valuations.

Is private equity prestigious? ›

Private equity is extremely prestigious. Compensation for both careers is very high, but the work/life balance in private equity is better, it is often the preferred exit route for investment bankers who have a few years of experience.

At what age do most people become VP? ›

Corporate Vice President Age Breakdown

Interestingly enough, the average age of corporate vice presidents is 40+ years old, which represents 90% of the population.

How much carry does a PE VP get? ›

$350-$500K

What is the average age of a VP? ›

The median age upon accession to the vice presidency is around 54 years and 10 months. This is about how old John Adams and Hubert Humphrey were at the time they entered office.

How many people pass Superday? ›

Yet in the nutshell, on average 2% of applicants reportedly pass the notorious Superday to get hired, approximately 300-400 slots each firm. Disclaimer: The number varies annually depending on the firm financial performance, the demand of human force, the number of applicants, and the quality of applicants.

How many people get invited to Superday? ›

On the other hand, you'll really need to put your best foot forward at the superday, as typically only about 25% to 35% of candidates who participate in one receive an offer.

Does everyone get invited to Superday? ›

A Superday usually entails interviews with around 4-6 senior bankers that last 30-60 minutes each. All candidates who have successfully passed through the first rounds of interviews are invited on- site to the firm's office for the location they are interviewing for.

How much do private equity interns make? ›

Average Salary for a Private Equity Internship

Private Equity Interns in America make an average salary of $40,242 per year or $19 per hour.

Is it hard to get an internship at a private equity firm? ›

Managers in a private equity firm have to sell their investment strategy to HNIs and other investment companies to attract more money to increase the value of that fund. It is tough to get an internship in this profile since most senior managers with tons of experience only are a part of this team.

Is it hard to get a private equity internship? ›

Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.

How many rounds are private equity interviews? ›

Private equity or leveraged-buyout funds usually conduct three to four rounds of interviews. For junior positions, however, the interview rounds could sometimes be as few as two.

How do you prepare for private equity recruiting? ›

Private Equity Recruiting Guide
  1. Making a good early impression within your banking group is key (better staffings, recommendations to firms, & help with headhunters)
  2. Talk to older analysts who have been through the process.
  3. Ask for old modeling templates and tests (PE firms recycle modeling tests)

Is private equity fast paced? ›

First, private equity is a more long-term approach to investing whereas hedge fund investing can be a more fast-paced environment. A private equity fund typically has an investment time horizon of 3 to 5 years with the life of the fund reaching the latter part of this timeframe.

How much money do you need to get into private equity? ›

The minimum investment in private equity funds is relatively high—typically $25 million, although some are as low as $250,000. Investors should plan to hold their private equity investment for at least 10 years.

Are private equity paid well? ›

Private Equity Associate Salary + Bonus: Your salary + bonus will probably be in the $150K to $300K range, depending on the size of the firm and your performance. Some of the large funds may pay more than $300K, but we're using the 25th percentile to 75th percentile range as a reference here.

Is private equity still a good career? ›

A career in private equity can be highly rewarding, both financially and personally. Private equity managers often take a great deal of satisfaction from successfully guiding their portfolio companies to new high levels of profitability.

Can you go straight into private equity? ›

Private equity firms do hire undergraduates. However, there are usually only a handful of undergraduates from top schools that recruit directly into PE firms. Usually with previous experience in investment banking or private equity. Boutique firms with minimal recruiting structure can accept undergraduates too.

How much does a VP in private equity make? ›

Salary Ranges for Vice President, Private Equities

The salaries of Vice President, Private Equities in the US range from $200,000 to $400,000 , with a median salary of $349,000 . The middle 67% of Vice President, Private Equities makes $349,000, with the top 67% making $400,000.

How much does the average person in private equity make? ›

For the vast majority of private equity associates, the base salary is around $135k-$155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

How much does a PE partner make? ›

At the low end, such as at a brand-new fund with a few hundred million under management, a Partner might earn in the $500K to $1 million range for base salary + year-end bonus. As fund sizes approach several billion under management, Partners move closer to an average of $1-2 million in base salary + bonus.

Does private equity pay more than consulting? ›

PRIVATE EQUITY WINS. Compensation. The package is often designed to attract investment bankers, who are better paid than strategy consultants. As a consequence, you should expect a significant increase of your total compensation package, up to 100% in some cases.

Does private equity pay more than banking? ›

The bottom line is that yes, the pay ceiling is higher in private equity, and there are MDs and Partners who earn many times – sometimes hundreds of times – what MDs in banking earn.

Is private equity more prestigious? ›

Private equity is extremely prestigious. Compensation for both careers is very high, but the work/life balance in private equity is better, it is often the preferred exit route for investment bankers who have a few years of experience.

How many hours do people in private equity work? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

Do people in private equity work long hours? ›

In private equity, you'll work hard, but the hours are not nearly as bad. Generally, the lifestyle is comparable to banking when there is an active deal, but otherwise much more relaxed. You usually get into the office around 9am and may leave between 7pm-9pm depending on what you're working on.

What skills do you need in private equity? ›

Associates often have an data-centric background, are well-versed in financial analytics, and have specific work experience in a given industry. Because associates often network and fundraise, successful private equity associates also have strong soft skills in communication, negotiation, and public speaking.

How do you pivot into private equity? ›

How to get into private equity
  1. Get into private equity right out of college. ...
  2. Get a master's degree. ...
  3. Transition from an engineering career to one in private equity. ...
  4. Transition from a consulting, accounting or investment banking role.

Is it harder to get into venture capital or private equity? ›

It is more difficult to go from a VC to a PE than the other way around. This is because VC work tends to be more specialized. Junior PE and VC professionals stay in their funds and earn experience, and then go for an MBA and join another company.

Do you make more in private equity or hedge fund? ›

Hedge fund compensation is more variable than private equity salaries + bonuses, but at the junior levels, you'll most likely earn a bit more in private equity. At the top levels, a star hedge fund PM who has a great year could easily earn more than an MD in private equity – depending on the fund size and structure.

Videos

1. Which Private Equity Firm Should You Work For?
(Peak Frameworks)
2. FUNDamentals: A Mid-Market Guide to the Fund Formation Process
(Holland & Hart LLP)
3. Mid-Market Private Equity Investing - David, Pine Island Private Equity & Goldman Private Investing
(Elevate Career Network)
4. Opportunities In the US Lower Middle Market
(FLAIA)
5. How Palm Tree Advises Private Equity Clients To Create Value in Complex M&A Situations
(Management Consulted)
6. How to Deal with Headhunters (Private Equity Recruiting)
(Peak Frameworks)

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