'Why PE?' Answering the First Question in a Private Equity Interview

Published: Feb 21, 2020

 Interviewing       Job Search       

Imagine that your strong resume, work experience, and influential network lands you an interview at a prestigious private equity firm. Now what?

Well, the next step is preparing for your interview. So here we take a look at one of the first questions you’re likely to be asked during an interview for a PE role: “Why private equity?”

The “Why PE?” question

Private equity firms often conduct first-round interviews on campus, or via phone or video conference. If you make it passed that initial screening, follow-up rounds are then typically conducted at the firm’s offices.

At some point, regardless of the phase of the interview process, you can expect to be asked why you’ve chosen to pursue a career in private equity. So when preparing for your interview, you need to think about what your answer might be. But don’t get overwhelmed. The firm is looking for a genuine answer.

What interviewers look for

It’s important to answer with a positive spin. In your answer, the interviewer is looking to learn more about your professional goals and ensure you know what you’re getting into. A well thought out answer should:

  • Show your passion for and knowledge of the PE industry.
  • Demonstrate your wish to apply your skillsets to building businesses and creating value.
  • Establish your rationale for choosing PE specifically, as opposed to investment banking or a hedge fund.

Do your best to convey that you enjoy learning about different businesses and that you’re invested in the process of helping to grow the businesses you work for. Highlight specific components about the job that interest you, like financial modeling and due diligence processes. And don’t be afraid to discuss your overarching career goals beyond this current role.

If you have a background in banking, discuss your passion for investing and desire to grow beyond the P&L aspects of a business. Be sure to leverage your previous deal management and relationship building skills and discuss how you’ll apply those to this role. If your background is in consulting, touch upon your experience working with clients’ management teams and how the operational knowledge you’ve developed during your time with consultancies will prove beneficial in identifying investment avenues.

Be succinct, yet specific, and don’t feel pressured to show off everything you know about the private equity industry. Remember, you don’t have to cover all the bases. Follow up questions will come.

And speaking of follow-up questions ...

Follow-up questions are an inevitable part of every interview. They’re designed to guide you in fleshing out your answer to a previous question and providing additional context before the interviewer moves on to a new topic. In addition to wanting to hear why you chose a career in PE, your interviewer might want to know why you didn’t choose certain other careers. Below are just a few common questions that may follow “Why private equity?”

Why not investment banking or consulting?

A possible answer might emphasize that while you enjoy the financial modeling and analytical aspect of the job, as a PE professional, you want to be more involved in how businesses evolve. As opposed to a consulting career, you might say that you want to be more involved in ‘implementing’ the operational improvements. PE can give you the perfect launchpad for a long-term career in investing. 

Why not hedge funds?

For this, you can use the difference between private equity and hedge funds to show your disposition toward PE. You may say, while in both private equity and hedge funds you will get to perform the role of an investor, hedge funds won’t give you an option to CONTROL your portfolio companies. PE allows you to be an active investor as well as actively add value to the businesses. It’s the art of a long-term view that sets PE above HF for you.

Why not venture capital?

This can be tricky, as both PE and VC invest in companies and accompany them in their growth. But still, there are subtle differences between the two. PE deals are a bit more complex and elaborate than VC deals. VC firms enter in the early stage of a business to help them finance the venture, while PE firms invest in fully established firms (that may be under financial stress). Furthermore, VC investments are made not in the entire company but only in a portion, while PE firms typically acquire whole enterprises. Also, VC investments are all about equity, while PE will give you exposure to equity as well as debt financing.

Ariaa Reeds is a professional writer who curates articles for a variety of online publications. She has extensive experience writing on a diverse range of topics, including business, career, education, and finance (private equityinvestment banking, etc.).