How to Make the Leap from Consulting to Private Equity?

Most consultants want to move to private equity. It may not every consultant’s final goal but most harbor the dream to make the switch to private equity.

What’s the challenge, it is infamously difficult for consultants to get into the industry. The private equity industry is biased against non-bankers and is skeptical to hire consultants. In this article, you will find out how any consultant (even MBB) can transition smoothly to PE.
 
Get recruiters to notice you

Start by reaching out to alumni, recruiters, and getting in touch with a few firms via cold emails.

However, don’t do that in a traditional way. When you email a recruiter don’t ask if they are hiring or when you contact alumni, don’t ask if they can help you get started in a private equity career. Instead, seek advice on ‘how you can enter into a PE career’ or ‘What should you do to transition from consulting to PE’. People will be more responsive and try to help.

Reach out to recruiters and aim to meet them in-person. Typically, recruiters don’t engage non-bankers unless you have a referral from a banking professional. So try and seek referrals from banking friends. Recruiters will likely ignore you if you don’t have a referral from a banker.

Aim to meet recruiters in-person, as it is easier to present your case in real life, better than talking to people on phone or exchanging emails.

Show your strength over traditional PE candidates. Investment bankers are the most preferred candidates for various PE roles. Try to show your strength that might not be accessible to recruiters in banking candidates. For instance, leadership skills are nearly missing in candidates coming from investment banking. Consultants, on the other hand, excel at leadership.

Further, consultants have a better understanding of a business strategy and operations than bankers, which PE firms that focus on operations of business appreciate. 
 

Prepare answers for objections. Coming from a consulting background, recruiters tend to have a lot of objections like lack of knowledge of finance or inexperience with dealing with large volume risk. Having an answer that will help recruiters overcome their inhibitions is good.  
 

Answer to ‘why shouldn’t we hire you?’

One of the top challenges for the consultants moving to PE is to get their foot in the door. 

The conventional view is you should go to a business school or get into investment banking before moving to the private equity industry.

In this case, sharing deal experience and working with top executives goes a long way in convincing recruiters that you fit the role of a PE professional. Additionally, recruiters have the following objections:

1. Inexperience with financial modeling: Take finance classes if you have no experience. Building a few models and sending across to recruiters is always a good idea. Additionally, refer to M&A or other deals you have worked on is a good idea. |

2. Reluctance to put in long hours: Work hours at PE are crazy. While consultants enjoy regular office hours. So play intelligently and put forward projects where you have managed to squeeze out more in less time. If you’re taking finance classes with a regular consultant job, it would be a good idea to point out.

3. Inexperience with leading deals: Point to your deal-making experience as a consultant.

Why not investment banking first?

This is a genuine question, which plenty of recruiters will ask you. So be honest in your answer.

The most common reason people become private equity investment professionals is more money. There’s nothing wrong about it, but your answer should include the reason for not taking the conventional route.

For instance, deal work is a major part of a private equity job. the experience of which bankers don’t get as part of their banking experience. Working in investment banking does offer valuable skills like building models and working with clients, but this experience could be gained elsewhere as well. Operational experience, which is more valuable and less common in PE is available through consulting experience. Including how consulting experience (acquisition and expansion projects) was valuable in the context of private equity will be helpful to make a good impression.

Prepare for modeling test and case studies

Case studies are part of the recruiting process at PE. The length of the case study could stretch to hours. For consultants, case studies are a regular task. However, don’t get overconfident and prepare smartly for it.

To prepare for cases and modeling tests, several online portals like mergers and acquisitions and related articles are available. Start preparing for them at least 3-4 months in advance.  

For modeling tests, it’s best to ask friends in investment banking to help you. Ask your friends to send redacted models, understand their approach toward building models, and practice building models in the same approach or better if you can. Practicing both 3-statement models and traditional LBO models will put you in a better position.