Depending on your approach, preparation, and timing, you might get great results – or a collection of interview horror stories.

And while you can find plenty of “headhunter lists” online, it’s more difficult to find tips and strategies to prepare for headhunters.

Many IB Analysts go into the process without understanding these points or the actual purpose of headhunters, which leads to sub-par results.

I’ll cover all those points here, but let’s start with the short version of what to know about private equity headhunters:

The TL;DR About Private Equity Headhunters

Here are the most important points:

• Importance: Private equity headhunters are the most important in the on-cycle recruiting process for larger funds (upper-middle-market and mega-funds) in the U.S.; the same 5-10 recruiting firms represent most of these PE firms.
• Purpose: Headhunters function as outsourced recruiting and HR for private equity firms. In the on-cycle recruiting process, their main purpose is to screen candidates and eliminate people who look good “on paper” but do not perform well in real life.
• Motivation: They receive 20-30% of your Year 1 salary as a commission for a successful placement, so their goals are always efficient placement and 100% offer acceptance. Therefore, headhunters will almost always try to convince you to accept job offers.
• Timing / Responses: If you’re not sure which types of private equity firms or strategies you’re most interested in, or you do not feel prepared for interviews, do not respond to emails from headhunters, and do not set up any meetings.
• Expectations: Treat all interactions with headhunters as first-round interviews and expect a mix of behavioral/fit and “deal experience” questions. You need a solid “story” and specific types of funds you want to target. Potentially, technical questions and even simple LBO modeling tests could come up (but they’re not likely).
• “Lists of Headhunters”: You can find lists of the “top firms” floating around online, but they’re mostly useless because only warm introductions/referrals and inbound contact matter (with some exceptions – see below). And relationships with specific headhunters matter much more than knowing which firm has PE firms A, B, and C as clients.
• Improving Your Odds: Most of the screening process is based on your bank, group, university, and GPA, so you cannot do too much to improve your initial selection chances. But even if you’re at a top bank and you pass the initial screen, it’s 100% possible to fizzle out and end up with no job offers.
• Bad Apples and Horror Stories: And yes, some private equity headhunters are unprofessional or unethical. This happens in any field, and if you get the sense that one individual is in this category, drop them.

The Top Private Equity Headhunters

In the U.S., a few of the PE headhunting firms with the most mega-fund and upper-middle-market clients include Amity Search Partners, Ratio Advisors (spun off from Amity), CPI, Henkel Search Partners (“HSP”), and SG Partners.

These firms represent PE firms such as Bain, Apollo, Silver Lake, KKR, Carlyle, Warburg Pincus, Blackstone, and more.

You could also add names such as Dynamics Search Partners, Gold Coast Search Partners (spun out of CPI), Oxbridge, CarterPierce, BellCast, SearchOne, Glocap, and GoBuyside to this list.

Some of these firms focus on middle-market private equity firms, some are more active with hedge funds, and some do more on the West Coast of the U.S.

As mentioned in the London private equity recruiting article, examples of top firms there include KEA Consultants, Blackwood, Dartmouth Partners, PER (“Private Equity Recruitment”), Walker Hamill, and Altus.

While it’s fun to create and debate these lists, they’re a bit pointless because you will get few responses if you contact headhunters randomly.

You always want a referral from someone who has worked with them before, such as older Analysts in your group.

Remember that headhunters earn commissions based on placements – and they know that if you are contacting them, you have a low chance of placing at the largest firms that pay the highest commissions.

How Do Headhunters Fit into the Private Equity Recruiting Process?

In on-cycle recruiting in the U.S., they do the following:

1. Officially kick off the process with intro emails to candidates (primarily Analysts at bulge bracket and elite boutique banks in specific groups). The timing seems to change each year; it was trending earlier (up to 2 years before job start dates), but it was changed to ~1 year in advance in the last cycle.
2. Collect resumes and data sheets from candidates. Some “data sheets” can be short (10-15 minutes to fill out), while others will be long and detailed (e.g., rank your preferences for every single client the firm has).
3. Set up initial meetings with candidates. These are first-round interviews with mostly behavioral and deal experience-based questions. These interviews exist to eliminate people who don’t know what they want and those who are not prepared for recruiting.
4. Set up “pre-interview events” such as breakfasts and coffee chats with candidates. Some of these could also be virtual, and in some cases, the PE firms will set them up directly.

Headhunters complete these tasks to screen, shortlist, and prioritize candidates.

For example, maybe Candidate A graduated from Harvard with a 3.9 GPA and worked in Goldman Sachs TMT…

…but he couldn’t explain his deals concisely, and he got tripped up on a few basic fit and technical questions, such as quick IRR calculations.

Candidate A wouldn’t necessarily be “eliminated,” but headhunters might put him at a lower priority and show other candidates to their best clients first.

Headhunters reprioritize candidates throughout the process based on their performance and overall response rates.

Once the various top firms have their candidate preference lists, a single firm will “kick off” interviews on the same date, and many others will follow to be competitive.

If you get interviews at this stage, you’ll have to complete a few 30-minute interviews with each firm and a timed LBO modeling test.

If you win an offer, you usually have 24 hours to accept it before it expires (sometimes a bit longer, depending on the year).

And if you don’t get an offer, you can continue to interview elsewhere.

Some firms end up extending the process, some start later, some people drop out or renege on offers, and plenty of smaller firms wait and do off-cycle recruiting instead.

Private Equity Headhunters in the Off-Cycle Process

The main difference in the off-cycle process (i.e., the one for roles with immediate start dates and processes that take weeks or months) is that headhunters have much less power.

Private equity firms still use them to collect resumes and data from candidates, but they may not conduct “first-round interviews” in the same way, and these pre-interview events and rapid-fire interviews do not exist.

The other difference is that you do not necessarily need to go through headhunters at all in the off-cycle process.

Many people network independently or get referrals to win these roles (sometimes even referrals from senior bankers in their group).

OK, But What Do Headhunters Do Besides “Communicating” and “Prioritizing”?

The answer is “not that much” because the entire job consists of communicating, prioritizing, and persuading.

In the initial meetings, the headhunters evaluate you to see if you’re polished enough to impress the top firms.

Essentially, they want to know if they could put you in front of a Partner or Founder and not be embarrassed.

“Polish” is a combination of your communication skills, deal experience, knowledge of the industry, and overall demeanor.

For example, could you have a 30-minute conversation without looking at your phone, stuttering, or repeatedly saying “um” or “like”?

Could you explain one of your deals without looking at your resume/CV, and could you give both a 30-second version and a 5-minute version?

If they asked you to explain a turnaround strategy to a 5-year-old, could you do it?

Headhunters look for these types of qualities and abilities in your responses.

The most common questions in this first round are:

1. Tell me about yourself / walk me through your resume – See our full guide to telling your story in buy-side interviews.
2. Why private equity / why the buy-side? – Yeah, there’s another article on this one.
3. Which types of firms are you interested in? – You must have a very specific answer for this one, or they will immediately dismiss you. For example: “Upper-middle-market private equity firms in California that focus on industry-specific SaaS companies within tech.”
4. Tell me about a recent deal you worked on – See the guide and some examples.

Many headhunters previously worked in investment banking or private equity, so they’ll know a fair amount about deals.

Oh, and they hear candidates talk about their deals every single year.

So, you can’t just BS your way through these discussions; if they detect even a hint of that, your chances go down.

Headhunters will steer you toward certain firms and discourage you from interviewing with others based on your responses, preferences, and performance.

But much of this is based on stereotyping or pigeonholing candidates, so if you’re in a group like FIG, you’ll always have a tough time interviewing for generalist roles.

After this first step, a headhunter’s job is mostly logistical until you reach the end of the process and win an offer.

Headhunters will almost always urge you to accept the first offer you get.

Maybe you want to consider other options, but to a recruiter, that translates into: “Possibly lose a large commission because this candidate wants an incrementally better offer.”

Unfortunately, accepting the first offer you get is usually the correct decision because of the speed of the on-cycle process.

You could try to leverage your offer to win other interviews within 24 hours, but you should not turn down an offer without anything else lined up.

How Do You Prepare for Recruiters and Manage Work At the Same Time?

Putting together all the pieces, here’s what I recommend:

1. Do NOT Respond to or Contact Headhunters Until You’re Ready and Know What You Want – You need to go into the initial meetings with a very clear target and be fully prepared for interviews and case studies. It’s a bad idea to respond to recruiters and then delay your process, as they’ll stop taking you seriously for future recruiting efforts.
2. Do Some “Mini-Preparation” Each Month – Since the on-cycle start date keeps shifting, you need to be prepared at all times. I recommend preparing 1-2 deal discussions (spin pitches into sounding like deals, if required) and reviewing them each month. In addition, consider recording yourself discussing your deals and listening to them on your commute. You can also complete short practice modeling tests in your downtime.
3. Don’t Make Excuses to Explain Brief Absences to Your Team – Citing repeated “doctor” or “dentist” appointments will seem ridiculous after a while. The senior bankers have been doing this for years/decades and understand how buy-side recruiting works, so if it comes up, state that you’re speaking with recruiters. If you need to be away for a day or multiple days, you might need more of an explanation.
4. Don’t Hesitate to Contact Headhunters Yourself IF You Have a Good Reason to Do So – For example, if you’re in a top group, but you didn’t receive the intro emails because you have a middle initial that the recruiters didn’t know about, get your co-workers to forward the emails and reach out yourself.

Also, even if you’re not in a headhunter-targeted group, if you know people who are, you could always reach out and ask them for referrals.

Recruiters are not going to put you on the interview list for KKR or Blackstone, but they might be willing to push your candidacy at other firms.

And If You Want to Avoid Private Equity Headhunters Altogether…

This will be almost impossible, but your best bet is to aim for smaller firms, hedge funds, or corporate development roles.

Similar to the off-cycle PE recruiting process, headhunters still recruit candidates for these roles, but they do less “gatekeeping,” and you can do more to improve your chances.

I would not call headhunters a “necessary evil” because they can be quite good, and some will do a lot to push your case.

It’s more accurate to say that they are a “necessary random element” because it could easily go the other way – especially if you walk into the process unprepared.

The post Private Equity Headhunters: Pathway Providers or Unethical Gatekeepers? appeared first on Mergers & Inquisitions.

The private equity case study is an especially intimidating part of the private equity recruitment process.

You’ll get a “case study” in virtually any private equity interview process, whether you’re interviewing at the mega-funds (Blackstone, KKR, Apollo, etc.), middle-market funds, or smaller, startup funds.

The difference is that each one gives you a different type of case study, which means you need to prepare differently:

What Should You Expect in a Private Equity Case Study?

There are three different types of “case studies”:

• Type #1: A “paper LBO,” calculated with pen-and-paper or in your head, in which you build a simple leveraged buyout model and use round numbers to guesstimate the IRR.
• Type #2: A 1-3-hour timed LBO modeling test, either on-site or via Zoom and email. This is a pure speed test, so proficiency in the key Excel shortcuts and practice with many modeling tests are essential.
• Type #3: A “take-home” LBO model and presentation, in which you might have a few days up to a week to pick a company, research it, build a model, and make a recommendation for or against an acquisition of the company.

We will focus on the “take-home” private equity case study here because the other types already have their own articles/tutorials or will have them soon.

If you’re interviewing within the fast-paced, on-cycle recruiting process with large funds in the U.S., you should expect timed LBO modeling tests (type #2).

If the firm interviews dozens of candidates in a single weekend, there’s no time to give everyone open-ended case studies and assess them.

You might also get time-pressured LBO modeling tests in early rounds in other financial centers, such as London.

The open-ended case studies – type #3 – are more common at smaller funds, in off-cycle recruiting, and outside the U.S.

Although you have more time to complete them, they’re significantly more difficult because they require critical thinking skills and outside research.

One common misconception is that you “need” to build a complex model for these case studies.

But that is not true at all because they’re judging you mostly on your investment thesis, your presentation, and your ability to answer questions afterward.

No one cares if your LBO model has 200 rows, 500 rows, or 5,000 rows – they care about how well you make the case for or against the company.

This open-ended private equity case study is often the final step between the interview and the job offer, so it is critically important.

The Private Equity Case Study, in Parts

This is another technical tutorial, so I’ve embedded the corresponding YouTube video below:

Table of Contents:

• 4:32: Part 1: Typical Case Study Prompt
• 6:07: Part 2: Suggested Time Split for a 1-Week Case Study
• 8:01: Part 3: Screening and Selecting a Company
• 14:16: Part 4: Gathering Data and Doing Industry Research
• 22:51: Part 5: Building a Simple But Effective Model
• 26:32: Part 6: Drafting an Investment Recommendation

Files & Resources:

• Case Study Prompt (PDF)
• Private Equity Case Study Slides (PDF)
• Cars.com – Highlighted 10-K (PDF)
• Cars.com – Investor Presentation (PDF)
• Cars.com – Excel Model (XL)
• Cars.com – Investment Recommendation Presentation (PDF)

We’re going to use Cars.com in this example, which is one of the many case studies in our Advanced Financial Modeling course:

The full course includes a detailed, step-by-step walkthrough rather than this summary, an additional advanced LBO model, and other complex case studies for investment banking, hedge funds, and credit.

Part 1: Typical Private Equity Case Study Prompt

In some cases, they’ll give you a company to analyze, but in others, you’ll have to screen for companies yourself and pick one.

It’s easier if they give you the company and the supporting documents like the Information Memorandum, but you’ll also have less time to complete the case study.

The prompt here is very open-ended: “We like these types of deals and companies, so pick one and present it to us.”

The instructions are helpful in one way: they tell us explicitly not to build a full 3-statement model and to focus on the market and strategy rather than an “extremely complex model.”

They also hint very strongly that the model must include sensitivities and/or scenarios:

Part 2: Suggested Time Split for a 1-Week Private Equity Case Study

You have 7 days to complete this case study, which may seem like a lot of time.

But the problem is that you probably don’t have 8-12 hours per day to work on this.

You’re likely working or studying full-time, which means you might have 2-3 hours per day at most.

So, I would suggest the following schedule:

• Day #1: Read the document, understand the PE firm’s strategy, and pick a company to analyze.
• Days #2 – 3: Gather data on the company’s industry, its financial statements, its revenue/expense drivers, etc.
• Days #4 – 6: Build a simple LBO model (<= 300 rows), ideally using an existing template to save time.
• Day #7: Outline and draft your presentation, let the numbers drive your decisions, and support them with the qualitative factors.

If the presentation is shorter (e.g., 5 slides rather than 15) or longer, you could tweak this schedule as needed.

But regardless of the presentation length, you should spend MORE time on the research, data gathering, and presentation than on the LBO model itself.

Part 3: Screening and Selecting a Company

The criteria are simple and straightforward here: “The firm aims to find undervalued companies with stagnant or declining core businesses that can be acquired at reasonable valuation multiples and then turn them around via restructuring, divestitures, and add-on acquisitions.”

The industry could be consumer, media/telecom, or software, with an ideal Purchase Enterprise Value of $500 million to $1 billion (sometimes up to $2 billion).

Reading between the lines, I would add a few criteria:

• Consistent FCF Generation and 10-20%+ FCF Yields: Strategies such as turnarounds and add-on acquisitions all require cash flow. If the company doesn’t generate much Free Cash Flow, it will have to issue Debt to fund these strategies, which is risky because it makes the deal very dependent on the exit multiple.
• Relatively Lower EBITDA Multiples: If the company has a “stagnant or declining” core business, you don’t want to pay 20x EBITDA for it. An ideal range might be 5-10x, but 10-15x could be OK if there are good growth opportunities. The IRR math also gets tougher at high EBITDA multiples because the maximum Debt in most deals is 5-6x.
• Clean Financial Statements and Enough Detail for Revenue and Expense Projections: You don’t want companies with 2-page-long Cash Flow Statements or Balance Sheets with 100 line items; you can’t spare the time required to simplify and consolidate these statements. And you need some detail on the revenue and expenses because forecasting revenue as a simple percentage growth rate is a bad idea in this context.

We used this process to screen for companies here:

• Step 1: Do a high-level screen of companies in these 3 sectors based on industry, Equity Value or Enterprise Value, and geography.
• Step 2: Quickly review the list of ~200 companies to narrow the sector.
• Step 3: After picking a specific sector, narrow the choices to the top few companies and pick one of them.

In software, many of the companies traded at very high multiples (30x+ EBITDA), and others had negative EBITDA, so we dropped this sector.

In consumer/retail, the companies had more reasonable multiples (5-10x), but most also had low margins and weak FCF generation.

And in media/telecom, quite a few companies had lower multiples, but the FCF math was challenging because many companies had high CapEx requirements (at least on the telecom side).

We eliminated companies with very high multiples, negative EBITDA, and exorbitant CapEx, which left this set:

Within this set, we then eliminated companies with negative FCF, minimal information on revenue/expenses, somewhat-higher multiples, and those whose businesses were declining too much (e.g., 20-30% annual declines).

We settled on Cars.com because it had a 9.4x EBITDA multiple at the time of this screen, a declining business with modest projected growth, 25-30% margins, and reasonable FCF generation with FCF yields between 10% and 15%.

If you don’t have Capital IQ for this exercise, you’ll have to rely on FinViz and use P / E multiples as a proxy for EBITDA multiples.

You can click through to each company to view the P / FCF multiples, which you can flip around to get the FCF yields.

In this case, don’t even bother looking for revenue and expense information until you have your top 2-3 candidates.

Part 4: Gathering Data and Doing Industry Research

Once you have the company, you can spend the next few days skimming through its most recent annual report and investor presentation, focusing on its financial statements and revenue/expense drivers.

With Cars.com, it’s clear that the company’s “Dealer Customers” and Average Revenue per Dealer will be key drivers:

The company also has significant website traffic and earns advertising revenue from that, but it’s small next to the amount it earns from charging car dealers to use its services:

It’s clear from this quick review that we’ll need some outside research to estimate these drivers, as the company’s filings and investor presentation have little.

Fortunately, it’s easy to Google the number of new and used car dealers in the U.S. and estimate the market size and share like that:

The company’s market share has been declining, and we expect that trend to continue, but it’s not clear how rapid the decline will be.

Consumers are increasingly buying directly from other consumers, and dealers have less reason to use the company’s marketplace services than in past years.

We create an area for these key drivers, with scenarios for the most uncertain one:

You might be wondering why there’s no assumed uptick in market share since this is supposed to be a “turnaround” case study.

The short answer is that we think the company is unlikely to “turn around” its core business in this time frame, so it will have to move into new areas via bolt-on acquisitions.

For example, maybe it could acquire smaller firms that sell software and services to dealers, or it could acquire physical or online car dealerships directly.

Another option is to acquire companies that can better monetize Cars.com’s large and growing web traffic – such as companies that sell auto finance leads.

As part of this process, we also need to research smaller companies to acquire, but there isn’t much to say about this part.

It comes down to running searches on Capital IQ for smaller companies in related industries and entering keywords like “auto” in the business description field.

In terms of the other financial statement drivers, many expenses here are simple percentages of revenue, but we could also link them to the employee count.

We also link the website traffic to the sales & marketing spending to capture the spending required for growth in that area.

Finally, we need to input the financial statements for the company, which is not that hard since they’re already fairly clean:

It might be worth consolidating a few items here, but the Income Statement and partial Cash Flow Statement are mostly fine, which means the Excel versions are close to the ones in the annual report.

Part 5: Building a Simple But Effective Model

The case study instructions state that a full 3-statement model is not necessary – but even if they had not, such a model would rarely be worthwhile.

Remember that LBO models, just like DCF models, are based on cash flow and EBITDA multiples; the full statements add almost nothing since you can track the Cash and Debt balances separately.

In terms of model complexity, a single-sheet LBO with 200-300 rows in Excel is fine for this exercise.

You’re not going to get “extra credit” for a super-complex LBO model that takes days to understand.

The key schedules here are:

1. Transaction Assumptions – Including the purchase price, exit assumptions, scenarios, and tranches of debt.
2. Sources & Uses – Short and simple but required to calculate the Investor Equity.
3. Revenue, Expense, and Cash Flow Drivers – These don’t need to be super-complex; the goal is to go beyond projecting revenue as a simple percentage growth rate.
4. Income Statement and Partial Cash Flow Statement – The goal is to calculate Free Cash Flow because that drives Debt repayment and Cash generation in an LBO.
5. Add-On Acquisitions – These are part of the “turnaround strategy” in this deal, so they’re quite important.
6. Debt Schedule – This one is quite simple here because the deal is not dependent on financial engineering.
7. Returns Calculations – The IPO vs. M&A exit options add a bit of complexity.
8. Sensitivity Tables – It’s difficult to draft the investment recommendation without these.

We pay special attention to the add-on acquisitions here, with support for their revenue and EBITDA contributions:

The Debt Schedule features a Revolver, Term Loans, and Subordinated Notes:

The Returns Calculations are also simple; we do assume a bit of Multiple Expansion because of the company’s higher growth rate by the end:

Could we simplify this model even further?

I don’t think the M&A vs. IPO exit options mentioned above are necessary, and we could also drop the “Growth” vs. “Value” options for the add-on acquisitions:

Especially if we recommend against the deal, it’s not that important to analyze which type of add-on acquisition works best.

It would be more difficult to drop the scenarios and sensitivity tables, but we could restructure them a bit and fold the scenario into a sensitivity table.

All investing is probabilistic, and there’s a huge range of potential outcomes – so it’s difficult to make a serious investment recommendation without examining several outcomes.

Even if we think this deal is spectacular, we must consider cases in which it goes poorly and how we might reduce those risks.

Part 6: Drafting an Investment Recommendation

For a 15-slide recommendation, I would recommend this structure:

• Slides 1 – 2: Recommendation for or against the deal, your criteria, and why you selected this company.
• Slides 3 – 7: Qualitative factors that support or refute the deal (market, competition, growth opportunities, etc.). You can also explain your proposed turnaround strategy, such as the add-on acquisitions, here.
• Slides 8 – 13: The numbers, including a summary of the LBO model, multiples vs. comps (not a detailed valuation), etc. Focus on the assumptions and the output from the sensitivity tables.
• Slide 14: Risk factors for a positive recommendation, and the counter-factual (“what would change your mind?”) for a negative one. You can also explain the potential impact of each risk on the returns and how you could mitigate these risks.
• Slide 15: Restate your conclusions from Slide 1 and present your best arguments here. You could also change the slide formatting or visuals to make it seem new.

“OK,” you say, “but how do you actually make an investment decision?”

The easiest method is to set criteria for the IRR or multiple of invested capital in each case and say, “Yes” if the deal achieves those numbers and “No” if it does not.

For example, maybe the targets are a 30% IRR in the Upside case, a 20% IRR in the Base case, and a 1.0x multiple in the Downside case (i.e., avoid losing money).

We do achieve those numbers in this deal, but the decision could go either way because the deal is highly dependent on the add-on acquisitions.

Without these acquisitions, the deal does not work; the IRR falls by 10%+ across all the scenarios and turns negative in the Downside case.

We need at least 5 good acquisition candidates matching very specific financial profiles ($100 million Purchase Enterprise Value and a 15x EBITDA purchase multiple with 10% revenue growth or 5x EBITDA with 3% growth).

The presentation includes some examples of potential matches:

While these examples are better than nothing, the case is not that strong because:

• Most of these companies are too big or too small to fit into the strategy proposed here of ~$100 million in annual acquisitions.
• The acquisition strategy is unclear; acquiring and integrating dealerships (even online ones) would be very, very different from acquiring software/data/media companies.
• And since the auto software market is very niche, there’s probably not a long list of potential acquisition candidates beyond the few we found.

We end up saying, “Yes” in this recommendation, but you could easily reach the opposite conclusion because you believe the supporting data is weak.

In short: For a 1-week open-ended case study, this approach is fine, but this specific deal would probably not stand up to a more detailed on-the-job analysis.

The Private Equity Case Study: Final Thoughts

Similar to time-pressured LBO modeling tests, you can get better at the open-ended private equity case study by “putting in the reps.”

But each rep is more time-consuming, and if you have a demanding full-time job, it may be unrealistic to complete multiple practice case studies before the real thing.

Also, even with significant practice, you can’t necessarily reduce the time required to research an industry and specific companies within it.

So, it’s best to pick companies and industries you already know and have several Excel and PowerPoint templates ready to go.

If you’re targeting smaller funds that use off-cycle recruiting, the first part should be easy because you should be applying to funds that match your industry/deal/client background.

And if not, you can always make a lateral move to a bulge bracket bank and interview at the larger funds if you prefer the private equity case study in “speed test” form.

The post The Private Equity Case Study: The Ultimate Guide appeared first on Mergers & Inquisitions.

The on-cycle version in the U.S. is a fast and fairly insane way to recruit for a job, particularly if you want time to think about the job before you start working.

I had never thought about covering European recruiting because I didn’t think there was much of a “process” there.

But that’s not quite the case.

It is more flexible and slower-moving than the U.S. on-cycle process, but there are recruiting windows and timelines.

To get the full story, I recently spoke with a reader who went through the process in London, won a private equity offer, and has now interviewed candidates for these roles:

London Private Equity Recruiting: Key Differences, Headhunters, and Candidates

Q: Can you start by telling us some of the key differences in the European process compared with the one in the U.S.?

A: Sure. First, to be clear, I will focus on the process in London for entry-level hiring (i.e., for Associate roles).

There may be differences in the continental European countries and smaller financial centers, and I would assume that the process is even less structured there.

In short, IB Analysts here leave for private equity after one (1) year on the job at the earliest, and it’s most common to have at least 18 months of full-time work experience.

Some Analysts may also stay in banking for closer to ~4 years and get promoted to the Associate level before moving into PE.

Instead of interviewing 1-2 years in advance, they tend to interview 3-4 months before the PE job begins.

The key “windows” are September – early December and January – April, and the recruiting process within those windows might take anywhere from 3 days up to 4-6 weeks, or longer. There are also opportunities outside these windows (more so than in the U.S.).

Headhunters are equally as important here, and you need to build relationships with them as well.

PE firms still recruit primarily from bulge bracket and well-known elite boutique banks, but it is possible to break in from a smaller firm, as in the U.S.; they’re also slightly more open to candidates from unconventional backgrounds.

Q: To clarify, you’re saying that the on-cycle process in which you interview for the job 1-2 years in advance does not exist in London?

A: Apart from 1-2 exceptions in the market, this is correct: it does not exist in the same way.

European funds understand the major problem with that approach: if you give someone a job offer 1-2 years before they start, they won’t be motivated to gain experience and improve their skills in the time in between.

Also, it’s too difficult to assess candidates with limited knowledge and deal experience. There’s less pressure related to the timing of MBA programs here as well.

Quite a few larger firms here have Private Equity Analyst programs for students right out of university, but that’s different from the IB to PE transition.

Q: You mentioned that headhunters are nonetheless still very important in London. Why?

A: As in the U.S., headhunters contact Analysts in specific groups at the large banks, but you can also reach out to them as a candidate.

Some headhunters even get to know students before they graduate, and it’s common to get referrals from candidates who know the younger students.

And as a university student or recent graduate here, it helps to get headhunter referrals from alumni who have already been through the process.

It’s crucial to keep the dialogue open and check in every month – or even up to twice a week if things heat up.

Recruiters look for the same qualities they do anywhere else: great communication skills, a well-defined set of firms and strategies you want to pursue (including names of specific, potential funds), and solid deal experience.

Q: What are some of the top London private equity recruiters?

A: Some of the top firms, among others, for London-based roles are KEA Consultants, Blackwood, Dartmouth Partners, PER (“Private Equity Recruitment”), Walker Hamill, and Altus.

Several divisions of well-known U.S.-based recruiting firms are also active here.

KEA Consultants, Dartmouth Partners, and Blackwood handle most of the mega-fund PE recruiting in London, but some other diversified recruiting firms and boutique firms also have great relationships.

Funds generally ask recruiters to “rank” candidates by tier, and the highest ranks can occasionally be recommended for an accelerated process.

Q: On that note, which types of candidates are competitive for PE roles in London?

A: The criteria are similar to the list in the U.S.: your bank, group, deal experience, university, personality/cultural fit, extracurricular activities, and academic results all matter a lot.

One difference is that the banks have slightly different reputations in Europe – for example, Rothschild is viewed as closer to an elite boutique here, so your chances of winning a PE role coming from Rothschild are higher.

Your deal experience also matters more because you’ll actually have legitimate deal experience by the time you recruit for PE roles!

Anecdotally, it seems like more consultants get into private equity here, and some firms even target 50% consultants and 50% bankers; most of the consulting hires come from the top three firms (“MBB” or McKinsey, Bain, and BCG).

In terms of industry and product groups, any industry team with good deal flow works, but M&A and Leveraged Finance have an advantage over ECM and DCM (as usual).

If you’re worried about getting pigeonholed because you work in a group like FIG or Oil & Gas, it depends on your bank’s reputation and how well you can spin your experience.

If you’re in FIG at a top bank, such as GS, MS, or Evercore, you can probably recruit for non-FIG PE roles.

But if you’re at a lower-tier firm, it will be harder to move from a specialized group into a generalist PE role.

If you have experience with deals involving standard, EBITDA-driven businesses, that can also help your case.

Finally, as with investment banking recruiting, languages are important in private equity here.

If a firm is interviewing two candidates with similar profiles who perform equally well, they’ll almost always pick the one who knows the more useful European language(s). Certain teams also recruit for specific language requirements from the start of the process.

London Private Equity Recruiting: Interviews and Case Studies

Q: Thanks for explaining that. You described the typical start dates for the recruiting process and the time it normally takes, but what about the process itself?

For example, do firms start by giving you a case study or modeling test, or do they save it for a later step?

A: Round 1 usually consists of a coffee chat or a similar, informal conversion.

In Round 2, they’ll usually give you a 1-hour modeling test where you have to build a relatively simple LBO model from scratch (e.g., one on a cash-free debt-free basis) or complete an existing template.

You might also take aptitude tests similar to the ones given at assessment centers.

In Round 3, you’ll go through multiple interviews with professionals at different levels, such as VPs, Principals, and Senior Associates. They’ll test a mix of technical, fit, and deal experience questions.

In Round 4, a few more people will join in and ask similar questions to “plug the gaps.”

Next – in Round 5 – you’ll get a case study with an information memorandum or other materials, and you’ll have to complete a model and make an investment recommendation.

You might have anywhere from 12 hours to a few days to work on it and present your findings.

If you pass this case study, you’ll start meeting the firm’s Partners in 1-on-1 interviews; you might also meet for lunch or drinks.

In the COVID era, I have heard that this entire process takes place over Zoom. I’ve also heard that firms tried “socially distanced walks” for a while (before the restrictions removed that possibility).

Q: We’ve covered private equity interviews extensively before, but what advice would you give about case studies? Are there any differences for London private equity firms?

A: The case study is the most frequent eliminator of candidates here.

In many cases, we get models that are mechanically correct, but which have wildly unrealistic assumptions, such as 10x EBITDA growth over ~5 years for a mature company.

You need to show your investment judgment and knowledge of the business – and you have to think through reasonable numbers in different scenarios and support them with data.

Candidates tend to get lost in small details that don’t even affect the recommendation rather than evaluating the business, market, and value creation levers.

There’s also a massive difference in “case study quality” among different candidates – far more than with their responses to interview questions.

So, my advice is to practice not just the financial modeling but also your skills in business evaluation, using companies and industries you’re interested in.

Unlike the rushed U.S. on-cycle process, you can take your time and get more practice here – so there’s no excuse to be underprepared.

Q: Some candidates also struggle with deal discussions, and some IB Analysts enter the process without having closed any deals.

How important are closed transactions?

A: They help, but they’re not the most important part of your profile; interviewers just want to see that you’ve worked on entire deals from start to finish.

They know that if a deal makes it 95% of the way but then falls apart at the last minute, it had nothing to do with the junior team.

If you’ve only worked on pitches, that could be a problem – especially if you’re recruiting after a few years on the job.

But if you’ve had real deal experience, you can prepare using the points suggested on this site before:

• What does the business do at a high level?
• What are its financial stats?
• What are the investment highlights and risks?
• How did you build the model, and what were the key drivers?
• How did you contribute to the deal?
• If you had been the buyer or investor, would you have done the deal?

London Private Equity Recruiting: Plan B Options and Other Tips

Q: One common complaint about the U.S. on-cycle process is that you can’t do much to improve your chances because your fate depends heavily on your university and current bank.

Is this also true of the process in London?

A: You can do a bit more to improve your chances here, such as networking with headhunters early on and getting referrals from contacts at other banks.

Also, since you could potentially recruit for PE any time within 1-4 years of your start date, you have a lot of time to gain better deal experience and improve your technical skills.

There are still some limits because your bank’s reputation and university’s quality do factor in, but it’s not quite as deterministic as the U.S. on-cycle process.

Q: If you go through this entire process but do not receive an offer, what should your next steps be?

A: It depends on why you did not receive an offer.

If you didn’t win enough interviews because your bank’s reputation wasn’t good enough, interview around and move to a larger bank as a lateral hire.

If your university wasn’t good enough, consider a Master’s in Finance or a similar program at a top university.

If you didn’t have good enough deal experience, wait a year, work on more deals, and apply again.

It’s not “one shot and you’re done” here – that could happen only if you’ve interviewed with every private equity firm in London and been rejected everywhere, which is almost impossible.

Some people even apply to the same firm twice and win an offer the second time around, if their profile has changed for the better.

The industry tries to push for a diverse range of backgrounds, so the issue might also be related to not “selling yourself” effectively.

Finally, remember that there is a lot of luck involved as well, so don’t draw hasty conclusions from only a few interviews.

Q: Do you have any additional tips or points that we haven’t covered?

A: Yes. First, seek out mentors who have been through the process. People message me for advice on LinkedIn all the time, and I try to respond to everyone I can.

Also, you need to treat private equity recruiting like a second full-time job.

That’s the biggest difference between candidates who succeed and ones who do not: treating recruiting like a full-time job vs. a hobby.

You might occasionally get lucky with the “hobbyist” approach, but if you want to maximize your chances of success, you need to use the “full-time job” approach.

Q: Great. Thanks for your time and for sharing all these tips!

A: My pleasure.

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