The PE Recruiting Guide.
Everything you need to know about private equity recruiting — what the job actually is, what fund types exist, and how to nail the LBO that decides every interview.
Section 01
The Associate Role.
PE is often called “banking 2.0” — same grind, different lens. Here's what the job actually is.
PE Associate Responsibilities
Writing Investment Memos
(Making pretty powerpoints / word docs)
Modeling Investments
(Digging deep into LBOs)
Taking Notes on DD Calls
(idk why this can't be automated today)
Portco Work
(Negotiating with lenders, updating valuations, and reviewing budgets)
Banking 2.0. — with an investor's hat.
PE is often referred to as banking 2.0 — this is largely true at the junior level. Being an associate in private equity is basically the same as being an analyst in banking, except you have more responsibility and are expected to perform at a higher level of intensity.
You're doing the grunt work. However, there is no room for error. These are investments that your bosses may have substantial money invested via carry. So, they care about every little detail and rely on you to do things right without being told twice / needing hand-holding.
Most sourcing work, board meetings, LP conversations, and investment ideas are taken care of by seniors at the fund.
You need to take a long-term view here. Do you want to be your banking MD pitching shit all day to generate advisory fees? Or do you want to be your PE principal working to source deals and generate a paycheck from buying and selling businesses?
The latter tends to be more interesting work for most people. In PE, even as an associate, you get to wear an investor's hat. You get to look at companies and form a view on whether or not they are good to invest in. In banking, you just do what the client tells you and the bank puts very little money at risk.
If you want to stick around in finance for a while, investing tends to be the better place to be in terms of money / lifestyle / interesting work. If you know you want to be an entrepreneur or leave finance, then PE isn't really going to teach you anything critical or do much more for your resume than banking would.
Section 02
A little about PE.
Brief by design — anything you can Google, we'll keep tight.
The business model
Private equity is the buying and selling of cash-flowing businesses using debt to enhance returns. Buying a company with a bunch of debt is called a leveraged buyout (LBO). On paper, PE firms have the ability to manage a company and change operations. In reality, there is very little time spent on operationally enhancing a portfolio company.
A fund raises capital from Limited Partners (LPs) such as insurance companies, endowments, and pension funds to buy companies and sell them within a 5-7 year horizon. PE is a lucrative business model because most funds deploy a 2/20 model (2% management fee on all AUM, 20% on excess returns from investments). Funds sell businesses to a). other funds, b). to strategic buyers, or c). to public markets investors by taking the company through an IPO. Most sales involve a sale to another fund.
Large funds tend to buy large companies. Small funds tend to buy small companies. Everyone tries to make a 20-25% IRR on their investments.
Section 03
Different types of PE.
Segmented by AUM, then by strategy.
Fund sizes
Mega-Fund
$100bn+ AUM
Upper-Middle Market
$500mm – $1bn AUM
Middle Market
$250mm – $500mm AUM
Lower-Middle Market
Less than $250mm AUM
Different strategies
- 1Buyout (LBOing companies) — most PE roles are buyout
- 2Tech (purely focused on investing in tech companies, may include some growth equity-style investments)
- 3Buy & Build (focus on making operational improvements — will see this in funds with longer-term capital)
- 4Distressed / Special Situations (buying companies that are not performing well or making hybrid debt / equity investments)
- 5Secondaries (investing in other funds)
- 6Infrastructure / Real Estate (buying real assets)
Section 04
How the LBO process works.
The end-to-end mechanics of an LBO — same flow that runs through every PE interview.
11 steps, end to end
- 1Significant diligence and assessment of comparative valuations to determine the relative value of the business in question
- 2Draft assumptions of the purchase price by applying an LTM EBITDA multiple or adding a premium to the stock price (if the company is public)
- 3Create a Sources & Uses to assess the amount of financing needed for the transaction (want as much leverage as possible to boost your return)
- 4Spread out the Income Statement over the forecasted period plugging in assumptions for relevant line items
- 5Project out cash flows over the hold period using all excess cash to pay down debt
- 6Calculate a closing and new balance sheet to use for the balance sheet projections. Make sure all sources & uses + other balance sheet adjustments, such as write-ups, are accounted for
- 7Build a debt schedule using the newly added debt to assess debt paydown throughout the forecasted period
- 8Project a balance sheet throughout the forecasted period using your 'new' balance sheet as the year 0 basis
- 9Build a returns analysis by applying an exit multiple to last year's EBITDA and then pay off all outstanding debt. Your end value is your exit equity value
- 10Calculate the net gain, MOIC, and IRR from year 0 (equity check written) to the final year of the investment (equity check expected to be received). Compare the calculated IRR with your fund's hurdle rate to determine the viability of the investment (PE funds typically look for 20-25% IRRs)
- 11Conduct a sensitivity analysis testing IRR & MOIC by stressing key inputs such as entry multiple and exit multiple
Section 05
Key scenarios to account for.
Tap any tile to reveal the mechanic. These show up in modeling tests, debrief questions, and LBO-edge-case interviews.
Section 06
Levers for juicing returns.
The six ways a fund actually drives IRR — beyond the spreadsheet.
Practice on real cases
Real LBO models from Apollo, Blackstone, and Oaktree.
15+ real case studies from actual PE processes — each with a complete answer key. Available to Premium subscribers.
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