1. Good news first: Many students aspire to a career in M&A or Private Equity
Through our activities and interactions with numerous students at EMERGERS, we find that many still aspire to a career at an investment bank, boutique or private equity fund. Their individual motivation is diverse – however we have broken down four themes we encountered frequently:
• Starting your career in M&A gives you the opportunity to learn various soft and hard skills from smart, driven and goal-oriented teams, helping you build a strong foundation for your future path.
• Although you have little client contact as a junior, you still network frequently and build a broad network of other investment bankers, consultants, lawyers and investment professionals.
• The acquired knowledge and skill set combined with the extensive contacts open attractive exit opportunities for young investment bankers.
• Finally, the above-average compensation in investment banking remains a key argument for starting a career in the industry.
Although the current labor market is heavily in favor of employees, the high level of interest in a small number of entry-level positions creates extraordinary competitive pressure, especially for positions at leading advisory firms and funds. Therefore, it is important to build up an optimal skill set, to prepare very well and to gain a deep understanding of the industry.
2.Corporate perspective: Brands matter most
Despite the competitive pressure described above, applicants often have several offers to choose from. Particularly when selecting an internship, applicants attach great importance to the brand of the employer. In addition, impressions gained of future colleagues during the interview play a major role and usually outweigh compensation or benefits during the internship. The brand of an investment bank or a private equity fund leads to problems at both extremes: while smaller or lesser-known players struggle to find suitable applicants, the top investment banks receive thousands of applications for a handful of positions. As a result, larger investment banks and boutiques in particular try to provide potential candidates with initial insights into their work culture through networking events and social media.
Even though improving employer branding is a complicated process and depends largely on operational success, i.e., closed deals, there are still numerous opportunities to improve employer branding in junior recruiting. A first step for smaller companies or foreign boutiques with a smaller presence in Germany is to make themselves visible to the relevant target group. A straightforward approach can be to seek contact with universities and finance societies.Concentrating on universities and finance societies with a strong focus on corporate finance offers the advantage that events and workshops will be attended by an exactly fitting interest group which usually already has relevant previous experience. However, competition for more experienced and trained young professionals is continously increasing. This high-performing group of graduates is also characterised by high career aspirations.
In order to reach a suitable and highly qualified target group, an excellent recruiting event, in the view of EMERGERS, has 3 characteristics:
• First, industry specific content should be featured so that attendees learn specialist knowledge that goes beyond their university lectures and gives them an impression of real life dealmaking.
• Second, insights into the business and culture of the company should be provided, so that applicants can really evaluate how the company is positioned in the market and how they differentiate themselves from their peers.
• Third, a personal exchange with team members of the company should be integrated, preferably in an interactive format.
3.Diversity is the dominant topic
Diversity in recruiting is becoming increasingly relevant, especially among large, listed companies and American investment banks. Nowadays, it is no longer simply a question of ensuring gender diversity, but also assembling talent from multiple ethnic backgrounds. As there is a positive correlation between operational and financial outperformance and diversity, we expect this trend to strengthen and become increasingly important for smaller companies as well.1 As a result, increasingly diverse teams will make the industry more attractive to a wider range of applicants. We therefore expect a positive dynamic regarding diversity that will make diversity recruiting measures obsolete in the long term. However, the industry still has a long way to go.
4.What makes a good applicant?
While applicants should have very good “technical knowledge” about investment banking, which includes topics like valuation, accounting, corporate finance, or the M&A process, other factors play a major role in today’s recruiting. Candidates should have a good understanding of the job and be aware of how much is required of them in investment banking and private equity. Conducting networking calls and meeting with current and former employees of the company can be a way to gain such insights.
Above all, a good candidate should be motivated, willing to learn and a strong team player who seeks to support the team, even during long working hours. Furthermore, they should be interested in improving themselves and the people around them.
5. Preparing for an interview in M&A and Private Equity
While it is challenging to receive interview invitations, the interview process at large investment banks or smaller boutiques is relatively straightforward and repetitive. To prepare for technical and personal fit questions, there are numerous documents that are available to young professionals free of charge. A good candidate should make sure they have an answer to any personal fit or basic technical question. It is particularly important that the interviewee does not simply learn the technical questions by heart, but understands the concepts. An experienced interviewer is not interested in the memorised questions, but checks the applicant’s understanding during the interview. As already mentioned, it is worthwhile to network with numerous people to gain insights into the recruiting process at the respective company. While the interviews for positions in M&A and private equity are quite similar, there are nevertheless crucial differences: in private equity interviews, the topic of leverage buyouts (LBOs) and sometimes also strategies for the operational improvement of portfolio companies plays a central role. Applicants are often required to do at least one case study in this regard and should be able to execute these under extreme time pressure. Applicants can leave a lasting positive impression by obtaining very detailed information about the company. At an investment bank or M&A boutique, one should analyze current and previous mandates, as well as the respective market position. While with private equity funds, one should intensively analyze the fund’s portfolio companies and their recent deal activities. In the best case, a discussion about the deal rationale or the business drivers of a portfolio company will develop during the interview. Such a conversation leads to a relaxed atmosphere, while the interviewee can show that he has not only memorized the technical questions, but also understands important concepts and strategic motivations and has spent considerable time researching the fund.
1https://www.mckinsey.de/~/media/mckinsey/locations/europe%20and%20middle%20east/deutschland/news/presse/2020/2020-05-19%20diversity%20wins/report%20diversity-wins-how-inclusion-matters%202020.pdf, retrieved 05/05/2022