So youve made it through your first 6 months in banking alive. Your waist is bigger from all those tiramisu desserts. but luckily your bank account has gotten even fatter than your stomach.

And your bank account is set to get even fatter in the future if you can successfully break into private equity .

While you know about the case studies and modeling tests youll get and the deals youll have to discuss. you havent put any thought into the Why private equity? question.

Which is a problem because the last thing PE guys want is a banker or consultant who wants to do PE simply because he/she hates banking or consulting or because everyone else doing it.

Why Does This Matter?

While PE firms want people who are technically proficient (one reason why consultants face a more difficult time getting in. at least in the US), fit is even more important than in banking because firms are an order of magnitude smaller .

Whereas the top banks have tens of thousands to hundreds of thousands of employees, the biggest PE firms in the world only have a few hundred and there are thousands of PE firms with fewer than 10.

Unlike banks, private equity firms have no need to hire an army of analysts to do grunt work: theyre not creating pitch books and competing for sell-side, buy-side, and financing mandates all day, and if theyre understaffed they can say no to potential investments.

The interview process can also be much more of an extended affair in PE. with many firms below the mega-fund level conducting interviews over months rather than the days or weeks you see in banking (the mega-funds do it much more quickly).

As a result, fit is critical and if the Partners doubt your motivations for wanting to do PE, they wont give you an offer.

What NOT to Say

As with some other interview questions. theres a temptation to say something stupid in response to Why private equity?:

• I dont like the hours in banking, and I want a better lifestyle.
• You can make much more money in PE because youre an investor rather than an advisor!
• Well all my friends are doing it!
• I want to control companies rather than taking orders from my MD all day.

I doubt you would say anything this bad in a real interview, but your actual answer may not be significantly better, either.

All the reasons above are bad answers, for different reasons:

• While the lifestyle may be a bit better at smaller firms, its still far from a 9-5 job. And at mega-funds its banking all over again .
• The pay is also not that much better. especially when you first start. Yes, Steve Schwarzman makes more than any MD in banking but hes also the Co-Founder of the best-known and oldest PE firm in the world, with 30+ years of experience.
• If you want to become an investor, you want to demonstrate independent thought as opposed to following what all your friends are doing.
• You dont control companies as an analyst or associate, you manipulate spreadsheets.

In short, any variant of I dont like my current job and PE would be better because [Insert Reason Here] is bad because its too negative.

And anything where you sound like you expect to conquer the world and become a trillionaire also sounds bad because it shows that you dont have a clue about how the industry works.

PE: The Promised Land? Fact and Fiction

You might have had dreams of becoming a baller at KKR or Blackstone making $100 million per year, but you should pinch yourself and wake up since that will never happen.

I often group IB and PE together on this site because the work is not much different .

If you dont like Excel, if you think EBITDA is boring, or if you have no interest in analyzing financial statements or reading about different companies, you should stop right now and do something more creative like advertising instead (I hear Don Draper is hiring ).

There are advantages and your role differs from what you do in banking, but if you fundamentally do not like analyzing and valuing companies, youre going to hate it.

You do get more responsibility at certain firms, sometimes youll get to observe Boards of Directors and sit in on meetings, and you dont get the stupid fix-the-printer-and-fetch-coffee tasks that you see in banking.

But please do not assume that its a night-and-day difference just because a bunch of 22-year old students in your finance club say it is.

Better Answers to Why PE?

To answer this question successfully, you need to avoid the clichés above and point out positive differences between PE and banking or between PE and whatever youre moving in from (consulting, corporate development, etc.).

But you need to do that by highlighting what youre looking for rather than what you dont like about your current job .

Examples of solid reasons:

• You want to work with companies over the long-term instead of just on a single deal.
• You want to get exposed to the operations of companies and understand all aspects rather than just the financial ones (note: exposed to, not control or improve).
• You want to contribute to companies growth by looking at add-on acquisitions and other expansion opportunities that only an investor would be able to execute.
• You see yourself as an investor in the long-term, and want to learn all aspects of the process and how to evaluate whether a company can deliver solid returns.

Its not wrong to make a direct comparison between PE and other fields (see the first 2 reasons) but you always want to downplay the negative part.

Ideally, youll tie the investments a PE firm makes to what youve done previously in school or work:

• The engineer-turned-banker has a much better story to tell if he recruits for a tech PE firm or growth equity firm and explains how hes interested in applying his knowledge of IT and finance to investing in IT companies.
• If youve worked in Restructuring or Distressed M&A. you have a much better story if you recruit for a firm that specializes in turnarounds or distressed investments.
• If youve done consulting for restaurants or food chains. youll have a much better story to tell when you recruit for a PE firm that specializes in those types of investments, or even in the consumer sector as a whole.
• If youve done corporate development at a media or broadcasting company. youll have a much better story to tell when you interview with Bono at Elevation Partners .

The exact reasons depend on your background and where youve worked before, but you should combine these points industry / company / deal focus + investing and working with companies in the long-term to frame your answer:

• The banker would talk about how he wants to work with companies over the long-term and learn how to assess whether they can deliver solid returns so that he can become an investor in the future.
• The consultant would talk about how he wants to learn both the financial and the operational aspects of companies, and how he wants to be involved with decisions that a company implements rather than just recommendations.
• The corporate development guy/girl would talk about how he/she wants the opportunity to work with all different types of companies in the market rather than just one.

Its not rocket science: highlight the positive differences between PE and your current field and why youre interested in pursuing them as you transition into becoming an investor yourself.

If youre coming from a banking or consulting background, you may get questions about PE vs. other exit opportunities:

Why PE Over VC?

If the PE firm youre interviewing with asks you this one, say that VC is too far in the operational direction for you, and how you feel its more about predicting the next Google/Facebook/Zynga than analytical reasoning.

You prefer PE because its a blend of both operations and finance and because you can help Founders with well-established businesses make them even better via solid analysis and research rather than just guesswork.

And, of course, if youre interviewing for VC you want to take the opposite position and say that PE is all about financial engineering with little value-add and that you can truly help early-stage companies take off because theyre more in need of help than established ones.

Why PE Over Hedge Funds?

This one is harder to answer because there are so many types of hedge funds and the strategies used and the fund sizes can make for completely different experiences.

But the main difference between most hedge funds and most PE firms is that in PE you invest in entire companies (at least, in developed markets) whereas at hedge funds you make much smaller investments and its often closer to trading.

You prefer PE because you want to understand how entire businesses work at a hedge fund you would only get the financial aspect and your skill set would be more limited.

Why PE Over Corporate Development?

This one also has a more subtle distinction: the main difference is that in PE you look at all sorts of different investment opportunities and companies, whereas in corporate development the scope is more limited and youre always looking at deals and partnerships for your own company.

So thats exactly what you say in your answer: you want to gain a broader horizon and work in industries and sub-industries outside your own.

Youre more likely to get this type of question if youre already in a corporate development role and youre moving into PE as a banker or consultant its not terribly likely unless you say youre also interviewing for corporate development jobs (um, dont do that).

Is Any of This True?

For all these Why PE examples Ive been referencing the mix of operational and financial work and working with companies over the long-haul so you might rightfully wonder if any of that is true.

Its somewhere in between: some firms do focus more on add-on acquisitions and operational improvements, whereas others really are just about financial engineering and using as much debt as possible to boost returns.

Even if the firm youre interviewing with is more focused on finance, though, you will still learn more about operations because you do a ton of due diligence before you actually invest (in banking you mostly just send these documents to other parties).

Unless you start or work at a real company, youll never learn the ins and outs of how it really works, but you will at least learn more than you would as a banker so its more true than the bad Why PE? answers in the beginning.

Hopefully not because you have delusions of grandeur and youre planning out which beach in Thailand youll buy with your first $10 million .

Focus on the positive differences, link your reasons to your background and long-term goals (just like with the Why investment banking? question), and dont fall prey to any of the bad answers about pay or lifestyle.

For Further Reading