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Finance: What are Five Questions You Can Expect to be Asked in a Private Equity Investing Interview? 4 Views
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What are five questions you can expect to be asked in a private equity investing inverview? What investments from the industry have you liked or at least followed? What is the math of private equity? What is your industry going to be? How much do you want to work? Why not public equity?
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Transcript
- 00:00
Finance allah shmoop what are the top five questions you
- 00:05
can expect to be asked in a private equity investing
- 00:09
interview All right people first things first before you walk
- 00:13
into the interview well you've checked out the company's website
- 00:16
right You've looked at their history the companies they've invested
Full Transcript
- 00:20
in and then googled the crap out of those companies
- 00:23
Right Then you've looked up on link thin in quasi
- 00:26
stalker like fashion each of the key partners of the
- 00:30
firm right and especially the people you're meeting with and
- 00:34
of course you've jotted down the random connections like wealth
- 00:38
one was also a nationally ranked squash player And be
- 00:41
sure you note that this is very different from your
- 00:44
grandfather who was a nationally ranked squash grower very different
- 00:48
i don't want to hit those things explode all right
- 00:51
So this is the very basics but more importantly you
- 00:53
have to know whether it is actually a real private
- 00:56
equity investment company the old school way or if it's
- 01:00
really a growth capital investment company and they're huge differences
- 01:04
and you've got to know the diff so before you
- 01:06
go in all right well in the olden days private
- 01:08
equity was all about finding fallen angels cos who used
- 01:13
to be vaunted respected loved and growing Then for whatever
- 01:17
reason demand suddenly changed Hi newspaper industry or its management
- 01:22
did stupid things like tick off its distribution retail partners
- 01:26
Hello coach luggage We're looking at you or the brand
- 01:29
itself while just got tired Hi Adidas or adi das
- 01:33
is they say today and the stock went from trading
- 01:35
at twenty times even toe like five times as wall
- 01:38
street fell out of love with company Well private equity
- 01:42
investors back then would borrow a whole heap of cash
- 01:45
and take the company private with a mindset of fixing
- 01:48
it and then taking it public using higher profits to
- 01:52
pay down debt and return the company to growth so
- 01:55
that it would carry a multiple a whole lot closer
- 01:57
to the twenty times it carried when people loved it
- 02:00
Then the five times it carried when you bought it
- 02:03
so that's private equity old school growth capital is something
- 02:07
very different Growth capital is just money already healthy companies
- 02:11
need thio grow maur if whatever dot com had another
- 02:15
one hundred million dollars in cash well then it could
- 02:18
Open No china Yeah china And then wow if everyone
- 02:22
in china just bought one thing on whatever dot com
- 02:25
well then wow The company would add eight billion dollars
- 02:28
in profits to its bottom line so i could really
- 02:31
use that hundred million bucks That's growth capital growth capitals
- 02:35
Totally different Animal there's no debt no turn around No
- 02:38
failed company no firing of half the workforce and redoing
- 02:43
the union contract It's just about investing for growth at
- 02:46
some price Got all that All right So here we
- 02:49
go Five questions managed to not change one What investments
- 02:53
from the industry have you liked or at least followed
- 02:56
Answer Well you'd better have followed a few They're not
- 03:00
necessarily going to ask you for specifics but it'd be
- 03:03
fair if they had a big fat high profile winner
- 03:05
in their portfolio and then they asked you about it
- 03:08
at least asked what you thought of it The deal
- 03:10
company product and the answer there You loved it genius
- 03:14
Such insight So this is how and where i want
- 03:18
to learn blob blob Blob of law in private equity
- 03:21
with puckering and tongue Yeah All right Next question welkos
- 03:25
Through the math of private equity there Okay so not
- 03:28
technically a question but here you might start blathering about
- 03:31
debt to even ratios and valuations of wildly optimistic internet
- 03:36
companies and you'd have scorn and guffawing and then you'll
- 03:39
realize that they were talking about their own compensation You
- 03:43
know how they charge their limited partner investors and what
- 03:46
carrier profit participation means to the partners their golden goose
- 03:51
or peace and their three homes and second set of
- 03:54
spouses or spice or whatever it is And families Yeah
- 03:57
so you've got to know how private equity it's paid
- 03:58
in two and twenty two percent fee twenty You gonna
- 04:01
carry generally Alright next number three what's gonna be your
- 04:05
industry We're talking like davey on that hill cartoon Alright
- 04:08
if you've made it this far well then you already
- 04:10
have some area of expertise right You're a semi young
- 04:14
guru of banks or retail buying called amazon or tech
- 04:19
or argentina How about drug distribution The legal kind Hopefully
- 04:24
this one since your notionally an expert in it will
- 04:27
be an easy answer You've followed the industry for at
- 04:30
least three years and got a check plus on your
- 04:32
final homework assignment Yeah congrats there Just remember that the
- 04:36
guy sitting across the table from you has probably followed
- 04:39
that industry for thirty years knows every ceo and their
- 04:43
secret lovers and also got a check plus on their
- 04:46
final homework assignment Yeah so take that All right moving
- 04:50
on for so much Do you want to work Answer
- 04:52
lots Whatever you need Anything you name it i take
- 04:56
fully caffeinated i'll be there sweep the leg whatever it
- 04:59
takes That's the answer got it Five why not public
- 05:02
equity While public equity is about nerve like it's just
- 05:06
a sense of where the danger lurks from where the
- 05:08
opportunities are where the big fat drafted you could kill
- 05:11
and eat for a month Private equity is all about
- 05:14
muscle You can't brute force your way tio picking amazon
- 05:18
overseers in nineteen ninety seven there's just a gut feel
- 05:21
that public market investors get where they have access to
- 05:25
scant data and very little knowledge that is direct to
- 05:28
actually go on regulation fd or full disclosure requires companies
- 05:33
to basically disclose little more than their quarterly reports and
- 05:36
the name of their company anytime asked private equity however
- 05:39
Has essentially no regulation So when you invest in it
- 05:43
well you get every detail you'd ever want And through
- 05:46
sheer force and will of doing amazingly detailed quality research
- 05:51
talking to every vendor and every supply heart person and
- 05:55
union factory workers and secretaries and on and on and
- 05:58
on a private equity deal may not be one hundred
- 06:01
eggs return but very few of them go big time
- 06:04
bus the way public stock to do all the time
- 06:07
and your temperament is simply set more for muscle in
- 06:10
lots of hard work than it is for nerve And
- 06:13
you know sensing the way the wind is blowing you
- 06:16
know the way the innkeeper and lame is Rob does
- 06:18
like that All right well there you go You're all
- 06:20
set for your interview and most importantly don't forget the 00:06:24.045 --> [endTime] tanaka close quarters there
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