Private Equity interviews can be intense and highly competitive, but there’s one crucial question that can set the tone for the entire interview: “Why Private Equity?” Your answer to this question holds significant weight and plays a pivotal role in determining whether you move on to the next stages of the interview process. In this article, we’ll delve into the importance of this question, the reasoning behind it, and provide you with strategies to craft the perfect response to secure your dream PE job.

Understanding the Significance

In the world of PE, the “Why Private Equity” question is not just a formality; it’s a make-or-break moment. If you can’t provide a compelling answer, your chances of landing the job plummet. While your response doesn’t have to be revolutionary or one-of-a-kind, it’s essential to get it right to move forward in the interview process.

Unlike investment banking or consulting interviews, where a remarkable answer to “Why this field?” can earn you offers, PE firms have a different perspective. They’re not in the business of charity; they’re here to make money. They will only hire you if they believe you’ll add substantial value to their team and help them generate profits. Thus, your “Why PE” answer is your opportunity to demonstrate that you’re a valuable asset they can’t afford to miss.

Why PE Interviews Ask “Why Private Equity”

PE interviewers aren’t asking this question to identify the best reason and hire accordingly; it’s more about filtering out candidates with the wrong motivations. Many individuals enter PE with misconceptions about the job, only to realize it’s not what they expected, leading to decreased productivity and team morale, or even mid-way resignations. PE firms aim to avoid these scenarios by ensuring you’re genuinely interested in the field for the right reasons.

Structuring Your Answer

Your response to “Why Private Equity” should be concise, lasting 3-5 sentences. Overexplaining can be counterproductive and might make you appear long-winded. Remember, you don’t receive extra points for an elaborate story. Instead, focus on conciseness, as your goal is to check the interviewer’s box and keep the conversation moving.

Sample Answers

Below are two sample answers that effectively address the “Why Private Equity” question:

Sample Answer 1: “I want to work in private equity because I’m passionate about learning all aspects of a business beyond just the P&L. Coming from an investment banking background, I believe that working closely with portfolio companies will enhance my understanding of businesses, setting me up well for a career in investing.”

Sample Answer 2: “I want to work in private equity because I genuinely enjoy learning about new businesses and collaborating with management teams over the long term. The opportunity to apply my operational knowledge from consulting to rigorous financial analysis, identify attractive investments, and add value to portfolio companies is incredibly exciting for me. That’s why I want to work in private equity.”

Comparing to Alternative Fields

PE interviews might also throw follow-up questions about choosing PE over alternative fields such as investment banking, consulting, hedge funds, venture capital, or fund of funds. Here’s how to navigate these comparisons:

Investment Banking or Consulting: Stress that you want to gain a more comprehensive skill set in PE, involving both financial analysis and operations. Emphasize your desire to be more involved in due diligence processes and long-term partnerships with portfolio companies.

Hedge Funds: Highlight that you are keen on understanding how entire businesses operate, as opposed to focusing solely on financial aspects. Mention your interest in conducting in-depth due diligence with private information and developing more holistic soft skills.

Venture Capital: Discuss your inclination toward investing in established businesses with a proven track record, your preference for long-term investments, and the importance of being actively involved with post-investment operational work.

Fund of Funds: Express your desire to have a broader scope by investing in corporations rather than funds. Mention your aspiration to get actively involved in the due diligence process and post-investment operational work.

Conclusion

Crafting a winning response to the “Why Private Equity” question is essential for acing your PE interview. Focus on the positive aspects of PE that align with your background and long-term goals, and steer clear of negative comparisons with other fields. Keep your answer concise and to the point, emphasizing how you’ll bring value to the PE firm. Remember, your “Why PE” answer is your ticket to demonstrating that you’re the right fit and a valuable addition to the team, setting the stage for a successful interview and potentially, your dream career in private equity.