When choosing a career path, private equity firms are a great choice. Usually, these companies provide a clear and concise growth path that candidates can choose. On top of that, private equity firms can grow significantly in size over time. It allows most employees to grow with the company. On top of that, they can reach a higher position in their career than going for better options.
However, cracking private equity interview questions can be critical to the process. In some cases, these questions may be more perplexing than those asked by public companies. Private equity interviews require technical knowledge, transaction experience, firm knowledge, and culture fit. On top of that, it can also include psychological questions that most candidates may find challenging to answer.
A question asked during these interviews is why candidates want to work in private equity. This question is also common in other jobs for smaller and larger businesses. Usually, it confuses candidates into believing it is a generic question. However, interviewers are looking for specific answers to judge the candidate. Before discussing this question, it is crucial to understand what private equity is.
What is Private Equity?
Private equity represents an alternative investment class. It includes capital from private companies that are not a part of a public exchange. In other words, these companies are not publicly listed. Private equity contains funds and investors that invest in private companies directly. It may also include engaging in buyouts of public companies, resulting in delisting public equities.
Private equity may also represent an investment where investors pool their funds to invest in specific companies. This investment occurs through private equity firms that identify private equity companies. Once they do so, they invest in investors’ funds into those companies. These firms also manage their investments during the process. Private equity firms primarily work towards maximizing investor wealth through private equity.
Private equity comes with several advantages that investors can get over other investments. Usually, these investments provide better returns due to the untapped potential. However, investors must identify the right companies. On top of that, private equity also provides an alternative investment class. By doing so, it can help investors develop a diversified stock portfolio. However, it may also come with some disadvantages.
The primary disadvantage of private equity investments is the unavailability of a market. Therefore, these investments are challenging to identify and make. However, some secondary markets have been formed that facilitate private equity investments. Private equity also comes with lower standards than public companies. Some companies may also provide limited information, making investing in them more challenging.
Overall, private equity is an alternative investment that involves private companies. They provide a better and diverse source for returns. Private equity investments usually occur through private equity firms. However, these firms have specific requirements for investors. On top of that, private equity is a risky investment and can incur significant losses. Nonetheless, they can also provide substantial returns for limited resources.
Why Do You Want to Work in Private Equity? 5 Best Answer You can use During the Interview
Private equity can be a source of high returns for most investors. However, it can also help employees and individuals to work in those companies. As mentioned, private equity provides significant growth opportunities within careers. On top of that, they can be a crucial starting point for most employees seeking higher goals. If the underlying company takes off, it can offer employees a significant career boost.
Most private equity companies realize the incentives they provide to employees. Therefore, they may face a significant influx of applications during their job search. However, they have developed techniques and methods to find the best candidates. One of these methods used by those companies includes asking questions during the interview. One particular question that they may ask is why candidates want to work in private equity.
Candidates may have many replies to that question. However, interviewers usually seek the best response from them. A list of the five best answers candidates can use is below.
Learning about the business and what makes them great
One of the best responses candidates can use the question is that they want to learn about the business. On top of that, they can also make additional remarks about how they are interested in the firm’s strengths. This answer usually impresses interviewers as they see long-term potential with the candidate. Candidates can also show their willingness to learn from the company to use to their advantage.
While this answer can be highly successful, it can also involve a pitfall. Candidates must not use it when they don’t understand the underlying company. Instead, they can utilize this response after knowing how the private equity company works. This way, if the interviewer asks questions, they will have an appropriate response.
Develop portfolio operations skillset
Candidates can also show interest in developing a portfolio operations skillset. Most private equity firms prefer candidates who want to work with investors. By forming this skill set, private equity firms can ensure the candidates are right for the job. This response shows the candidate’s high potential and means profits for the firm.
Financial analysis is an essential part of the job at a private equity firm. However, developing portfolio operations is more crucial in the long run. With this response, candidates can impress their interviewers. On top of that, it also sets them up for a career in investing. This response can be highly effective if used properly.
Point out specifics
Candidates must also research the private equity firm to which they apply. Using generic answers from online articles or gurus can be highly detrimental. Usually, most interviewers can identify those responses due to how often they hear them. Most candidates provide a generic answer to why they want to work in private equity.
Instead, candidates must focus prepare for the interview beforehand. They must research the firm to which they apply. Usually, they can study the firm’s website and past portfolio companies to gain insights into its operations. Once they do so, they can use those points to their advantage. Pointing out specifics can also help them impress interviewers and score the job.
Show a desire to be more involved in the due diligence process
Financial analysis and modeling are crucial to working in the private equity industry. However, it represents a skill set that is common among most candidates. Interviewers prefer those who can excel at these points, which usually includes all interviewees. However, they may also look beyond that. Therefore, a good response to the question is to show a desire for involvement in the due diligence process.
The due diligence process is crucial to interviewers as financial analysis and modeling. By being a part of this process, employees can learn all aspects of the private equity firm. Interviewers also seek candidates who wish to be more involved than just financial issues. Therefore, this response can have a significant impact on them.
Work with management teams over the long run.
A significant part of working in private equity is coordinating with management teams. Usually, private equity employees must work as a part of a team. Therefore, showing teamwork skills can be significantly crucial to the job. On top of that, they must also coordinate with management teams from various companies for investing.
When employees work with management teams in the long term, they add value to their portfolio companies. This process leads to more wealth for investors and higher revenues for the firm. Usually, teamwork and coordination skills are highly crucial in this regard. Therefore, this response can earn some points for candidates.
Private equity represents an investment in private companies. Usually, these investments occur through private equity firms. Working in these firms can be highly rewarding and help along a successful career path. However, cracking the interview may not be for everyone. When asked why candidates want to work in private equity, they can use one of the five answers above.