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Making a move into Private Equity is by no means easy. It is a highly competitive landscape with many variables on a fund-by-fund basis, so be prepared to encounter more rejection than acceptance. In 2015, there was a decrease in the number of Private Equity deals completed (although the total value rose) which reflected a global economic slowdown. This market regression is predicted to carry on further into 2016 and, whilst the fundraising climate is still relatively stable, there are indicators of fewer investment opportunities in the coming year. Such circumstances, combined with volatility in the banking sector, mean that the move may become all the more difficult.

Unsurprisingly then, differentiating your background is crucial when looking to move to the buy side, especially in an environment where funds are being increasingly selective about the calibre of individuals they are looking to hire. The key challenge, therefore, is how to make yourself stand out.

Here are my top 5 tips on what to think about and what to do, in advance of starting your search.

1. Start Investing:

   If you have not already, then put time aside to create a personal portfolio of stocks, and ideally build and maintain corresponding valuation models for it. This not only gives you neat examples of your analytical process and companies which you have assessed, and prepares you for case-study work, but also provides a simple yet hugely effective indication of your enthusiasm for and commitment to investing. Compliance regulations can often restrict you from putting real money to work in such portfolios, but a virtual or ‘paper’ account is equally effective in training you to refine your research methodology and ability to develop conviction. Lastly, managing your own investments will help you to determine with which sort of fund strategy you wish to pursue in your career. Do you enjoy assessing large cap businesses such as Apple or GSK, or do you find yourself more interested in small cap companies, for instance Avanti or Caledonia Mining? Do you analyse in further detail the debt / credit structure or do you get taken by the equity story and scalability? Do you like performing companies or underperforming / distressed companies? As a consequence of this diligent process, you will be better informed when researching funds running your preferred strategy and you may even have come across, through your investment research, the companies in which they have invested.

2. Practice Makes Perfect:

   In the majority of Private Equity interview processes it is highly likely that you will face some form of technical modelling exercise or case-study. You are also likely to have some brain-teasers thrown in for good measure. All of these are relatively easy to practice or train for further but, as obvious as it may sound, this needs to be done methodically and over time and not the day before the final interview for your ideal role. If you have been working in consulting or practice, then – often by design – your role will not have been intended to make you an expert financial modeller, but whilst these backgrounds have their own benefits, most Private Equity funds still expect you to have developed technical skills. It is thus advisable to enrol in a course or, at the very least, familiarise yourself with the YouTube ‘building a Leveraged Buyout Model’ video. Create them from scratch and then limit the information you have on the companies so that your ability to create assumptions becomes better. Share them with peers or colleagues so they can be critiqued. Meanwhile, if you are in investment banking then you are expected to be a strong financial modeller, but will have learnt to prioritise valuating businesses and presenting them as attractive over assessing and consequently improving their operating and commercial aspects. Consequently, you would benefit from starting to scrutinise, in more granular detail, these elements of the companies which you are advising from an operating perspective. Being able to spot the key parts of the operating information is often as important to a successful case study process as a great financial model. 

3. Know Your CV:

   This may sound simple and yet it is an Achilles heel for many. Private Equity professionals – who will of course be your interviewers – are natural sceptics, so expect them to drill deeply into everything that you have written on your CV. They want to know precisely the extent to which you have participated in projects or deals, the knowledge that you have of the work in question (company profile, numbers on a deal, the financials, etc.), and your independent view on that work and the outcome. They are looking for individuals who have clearly had deep involvement in deals as opposed to merely surface-level process management, who can provide detailed recall on each case, and most importantly who can show independent thought on their work. Objective, even critical, self-assessment cannot be recommended highly enough as preparation for an interviewer’s questions about your experience and capabilities. 

4. Know Why:

   I often ask the question ‘Why private equity?’ to prospective candidates whom I meet for processes and, more often than not, I am met by a slightly perplexed expression and incredulity that I would ask something so apparently obvious. Knowing why you want to move into Private Equity is the key, but honesty behind the reasoning is all the more crucial, and some idiosyncrasy and nuance are ideal. Many individuals churn out the same generic responses to this question and end up being blurred in with all their competition. My clients’ feedback is so often that they long to hear something different, rather than “learning has plateaued in my current role”, or “this seems interesting”.

   As we discussed in the section on Starting Investing, if you have already carried out concerted background research on the move to Private Equity, then you are far more likely to have a compelling reason as to why you are making it. It is also far more likely to be a little different to the next person, or at very least to have a genuine personal touch. This is a rare opportunity given to a select few, and is thus a privilege, not a right. From those who have given the question above real, careful thought, sincerity will shine through, and this will leave a far greater impact on the firm with which you are interviewing, compared to the standard, by-rote answers.

5. Benchmark:

   Look around you; your competition for these roles is highly likely to be your colleagues and peer-group. Talk to them. Know their backgrounds and the experiences that they have undertaken in order to enhance their careers. What do they have that you do not? Would you hire them or you? If them, then can you do anything to make yourself a more competitive prospect? Funds want to hire the best, so you must do everything feasible to ensure that this is you.

This is far from an exhaustive list, but I hope that it provides food for thought as you consider a move into Private Equity.