How to break out of banking and into private equity

Breaking into private equity isn't easy, but there is a proven path to success.

Like most things in the finance world, transitioning from banking to private equity isn’t a walk in the park. That doesn’t mean it isn’t popular, however. Private equity jobs pay better and offer investors more action than their advisory positions did. These benefits attract lots of competition, particularly bright young talent coming out of college. Since firms have so many applicants to choose from, breaking into the private equity world takes real, concerted effort. Thankfully, there are steps to take that have been proven to work.

Private equity shops, like every other employer, want to see a successful track record – that includes a respectable college and an impressive GPA – but your previous employment history and banking experience are given much more weight during the interview process. Putting your experience to use in the right way can give you a leg up on the competition. Here’s how to do it.

“The temptation to leave may be pressing, but candidates shouldn’t rush off.”

Gain experience then apply selectively
The temptation to rush off to a private equity fund may be pressing, but eager candidates shouldn’t leave their investment banking jobs too early. Spending enough time in the banking world to make sure that you leave with an impressive body of experience is necessary to successfully make the transition to private equity. Two years is generally considered the bare minimum.

Once you’ve got some substantial experience, it’s time to distribute your CV. But there’s more to it than just sending your application off to every recruitment firm in the city. Do some research on potential employers that seem like they’d be a good fit for what you bring to the table. Private equity firms are much smaller worlds than investment banks, and you’re likely to stay with the same firm for at least a few years as you wait to earn paid carried interest, so finding a place you’re comfortable with is important.

Be on good terms with senior management
Before you make a move to private equity, you’ll need to develop good relationships with more senior bankers in your firm. They’re almost guaranteed to be among those called to offer a reference. A great reference is among the most important aspects of the interview process in the private equity world. Half-hearted support, or even just a tepid endorsement, is usually enough for an outright dismissal, regardless of how far into the process you’ve made it.

Remaining positive and productive are essential to winning the support of senior bankers.Remaining positive and productive are essential to winning the support of senior bankers.

So, how do you win the genuine backing of senior bankers? The answer, in short, is positivity. You don’t complain about long schedules, heavy workload or a lack of sleep. It doesn’t matter if your coworkers do nothing but bemoan their nonexistent social lives – you are focused on getting the job done without boasting about your productivity. And there should be no question about your productivity, because in addition to a positive attitude, nothing wins a manager’s approval like consistent, high-quality work. That means your spelling is perfect, your workspace is organized and your content is precise.

Adapt your mindset
Private equity interviews, unlike undergraduate interviews, concentrate on technical skills and company-culture fit in almost equal measure. Hiring managers will ask questions regarding your career goals and definition of personal success as often as they’ll ask you to analyze a particular industry or to describe previous transactions you’ve been a part of. Questions asking you to define industry terms aren’t so common as they were when you were interviewing out of college, so don’t expect to prepare in the same way you did then.

Instead, you’ll have to adapt your mindset from its banking mold. Private equity firms want to hire investors, not advisors, so going into an interview with a couple of detailed investment proposals is an excellent way of preparing for questions that are likely to arise inquiring about your vision for the firm’s future. But be ready for a variety of tests. Some firms have been known to give job candidates offering memorandums in the days before an interview with the expectation that they will arrive with an investment thesis and be able to offer leverage assumptions with a high degree of confidence.