The Private Equity Internship

It’s no longer the case that the only way into private equity is after a two-year stint in investment banking. Private equity internships and analyst programs have opened the door for earlier transitions to the buy-side.

Depending on the firm, a PE internship can be a great way to get early exposure to life as an investor. It’s also a perfect opportunity to set yourself up well for any full time recruiting, whether that’s staying in private equity or going the more traditional banking route.

The Background

I would broadly group private equity internships into two different buckets.

There is the traditional junior year summer analyst program offered by a number of large-cap and upper middle market firms. Then there is the less traditional, unstructured opportunity at middle market and lower middle market firms.

Both are great options, depending on your needs and timing. Generally, the large-cap and mega fund opportunities will be highly competitive, while the middle market roles will be more accommodating and good targets for freshman, sophomore, and off-cycle internships.

Structured Programs at Top Firms

The first option, structured large-cap / mega fund programs, is a replacement for the standard investment banking internship. You’ll recruit well in advance, have an 8 – 10 week program alongside other interns, and compete for a potential full-time offer at the end of it.

This is ideal if you know you’re interested in private equity and think you might want to make a career out of it.

The downside is there are not many of these programs, and the programs you’ll find often have very few seats available compared to banking summer analyst classes. This means that there is intense competition for these spots, making these internships some of the most competitive there are.

A typical successful profile will have a 3.8+ GPA, attend a top target university, and have completed multiple prior investment banking, private equity, or investing internships (public markets, VC, etc.).

How to Recruit for a Mega Fund Internship

Typically, these roles will be posted to campus job boards at top universities. The timeline will be similar to that of investment banking summer analyst roles, recruiting well in advance of the start date.

If you’re applying through on-campus recruiting, there’s not much else to do (beyond networking) to secure an interview if you have a top profile.

However, there may not even be formal job postings outside of a core group of target university job portals. If you’re at a school that isn’t a finance recruiting hotspot, you’ll likely need to put in significant legwork on your own. In this case, networking is paramount as you may not even get a chance to apply without it, no matter how strong your profile otherwise is.

If you fall into that bucket, start reaching out to alumni, or even cold emailing, as early as you can to ensure you don’t get left behind.

Unstructured Private Equity Internships in the Middle Market

The second type of internship program is much more accessible, both due to a greater number of seats available and because of increased flexibility beyond the standard junior year summer.

I think these types of internships are ideal for freshman and sophomores who are looking for a strong early experience and get their resume ready for investment banking recruiting. You’ll have an early introduction to financial modeling, the M&A process, and an opportunity to start thinking like an investor.

Clearly this will give you a leg up in banking if you go that route, but it will also help inform you whether or not you’re interested in pursuing private equity as an exit from banking. Even beyond that, you’ll have a better feel for what type of investing you’d like to do – upper middle market, lower middle market, VC/growth, or buyout. The vast majority of analysts target whatever exit opp. they think sounds coolest at the time. If you actually know what you want you’ll come across better in interviews and have a much higher likelihood of landing somewhere that’s a good fit.

How to Recruit for a Middle Market Internship

Some middle market firms will have established programs that recruit from target schools in the same way the mega funds do. However, the majority of firms will be unstructured and run much more ad hoc processes.

This can be great, because it allows you more of an opportunity to get your foot in the door.

The first step is to make sure you’re aware of any recruiting going on at your school. Assuming you’re keeping track of that, the next thing you need to do is proactively reach out to firms you’re interested in.

Many firms will be receptive, particularly if you have a strong resume and are able to leverage alumni or other connections.

Your likelihood of landing an unstructured program will increase the smaller the funds you target. They’ll have fewer people reaching out, no formal recruiting process, and may be more likely to prefer local candidates.

The great thing is that it really doesn’t matter if you end up at a very small firm on the far end of the lower middle market. Getting any reasonable private equity experience this early in your career will differentiate you. It’s a great springboard to bigger and better opportunities in the following summers and for full time recruiting.

Private Equity Internship Interviews

Interviews are likely to be similar in difficulty to what you would experience in summer analyst banking recruitment.

You should expect to be asked fundamental technical questions on basic valuation, accounting, and modeling, with more of an emphasis on LBO mechanics.

You should know the primary drivers of an LBO and be prepared to work through a paper LBO in case you get asked.

The primary difference between private equity internship interviews and banking interviews will be the increased emphasis on investing. You’re much more likely to be asked about deal experience (if any), LBO targets and investment pitches, and your thoughts on various business models.

If you’re preparing yourself for summer analyst recruiting at a mega fund, your experience will be very different than a freshman year internship at a middle market shop. In addition to the items above, be fully prepared to handle case studies and LBO model tests.

You probably won’t get anything too complex, and the bar will be lower than standard associate recruiting, but you will be expected to do some level of private equity-specific interview prep.

What Do PE Interns Even Do?

Most of your summer experience will involve working in coordination with an associate on the deal team. You’ll likely be assisting around the edges on various assignments across diligence, modeling, PortCo coverage work, and general firm admin responsibilities.

Don’t expect to run the model or do full analyses yourself. Instead, you might be responsible for a small, segmented portion of the model or a light touch, specific carve-out of a broader diligence workstream. There will also probably be plenty of work pulling together CIM reviews, spreading comps, doing various benchmarking analyses across the portfolio, or completing miscellaneous market research. Generally, the firm and specific deal teams will help ease you into things to the extent you can handle it.

The more established programs may have structured trainings for you to attend, but the majority of middle market firms will just throw you into the thick of it. You’ll learn everything that you need on the job – no need for a lot of pre-internship prep beyond what you needed to get past the interview.

The one thing to be wary of is smaller shops or growth equity-oriented shops that have a significant sourcing component (looking for new investments). There’s not necessarily anything wrong with sourcing, but it may not be the type of work you were hoping for. I think some amount can be helpful to start forcing you to think like an investor, but you probably don’t want to spend the entire summer cold calling. Just try to do your research and find out what you’re getting yourself into.

Private Equity Internship Closing Thoughts

On the whole, if you have a chance to snag a private equity internship you should take it. The right firm can provide a great experience and make you a more well-rounded finance professional than what you’d get in investment banking.

The caveat here is that you do need some degree of prioritization. A middle market private equity internship at a reputable firm should take precedent over investment banking, FP&A, or Corp. Dev. roles for the freshman and sophomore summers.

But, you should not take that same role over a strong investment banking summer analyst position. Generally, the only junior year private equity internships that make sense are those at the largest mega funds and upper middle market firms.

It’s important to get structure, reps, and brand name early in your career (critical for junior summer analyst and full-time analyst roles). Large-cap PE and top investment banks will do that, but it’s more hit or miss for middle market private equity.

Sam Hillier

Sam Hillier is a reporter at Transacted covering private equity and investment banking. He previously spent time as an investment professional focused on direct buyouts, as well as an earlier strategic advisory stint.