How to Answer “Why Private Equity” and Not Get Dinged

So, you’re an investment banking analyst dreaming of breaking into private equity. You’ve put in the hard work to master technicals for PE interviews and are eager to take your investing career to the next level.

But before you can start flying private to your own personal island, you need to nail the infamous “why private equity” interview question. Failing to articulate a thoughtful, sincere answer is a surefire way to get dinged.

Fear not. We’ll break down exactly how to structure a compelling response that checks the right boxes for PE interviewers. By following this approach, you’ll convince them you’re pursuing private equity for the right reasons.

Why Interviewers Ask “Why PE” First, let’s address the elephant in the room – PE interviewers aren’t looking for the candidate with the most unique or fascinating story. No one lands an offer solely based on their “why PE” response.

Firms ask this question to efficiently weed out candidates pursuing private equity for misguided reasons. They’ve seen their share of hires who thought the grass was greener, only to quit when the job didn’t match their false expectations.

PE is a demanding, niche field. Juniors who aren’t intrinsically motivated tend to underperform and drag down the team. Firms have been burned before, so this question helps them avoid repeating past mistakes.

Bankers Must Pivot Their Pitch Many analysts, especially ones coming from banking and consulting, assume they can repurpose their “why IB” or “why consulting” stories that landed them their first job. But PE interviewers are a different audience with different priorities.

In IB and consulting interviews, firms look for raw talent and compelling personalities. An inspiring origin story can seal the deal. Technical skills can be taught on the job.

The PE recruiting game has different rules. Firms hire seasoned operators and proven deal executors. They bet on a sure thing. A unique personal narrative matters far less than concrete technical skills, investor mindset, and value-add potential.

How to Structure Your Answer

Now that we understand the question behind the question, here’s how to deliver a response that resonates:

Keep it concise: Limit your answer to 3-5 sentences, 30 seconds max. Rambling on signals you don’t appreciate the interviewer’s time or understand the on-point communication style of the buy-side.

Focus on PE-specific reasons: Explain why PE is the best fit for your skills and interests at this stage. What unique aspects of the private equity investing model excite you and align with your strengths? Be as specific as possible.

Highlight your value-add: Interviewers don’t just care about why you want them, but why they should want you. Touch on a few key ways your banking experience has equipped you to hit the ground running and contribute from day one. What gaps in their team can you fill?

Reasons to Mention

Choose 2-3 of the following points to include in your answer. Customize them based on your background and the firm’s strategy when possible:

You want to be deeply involved in due diligence beyond just modeling. Analyzing the operations, management, and market dynamics hands-on will make you a more effective investor.

The opportunity to add operational value to portfolio companies and partner with management teams over the long-term is appealing. You’re excited to drive strategic initiatives that create tangible results.

PE is consistently the highest-performing asset class. You want to learn the investing playbook from the best in the business. Developing this portable skillset under expert guidance will serve you throughout your career.

The longer holding periods in PE align with your interest in understanding businesses holistically. You look forward to gaining a 360-degree view of companies that’s rare in other investing roles.

You want to augment your IB skillset with the more direct, operationally-focused work of PE investing. Banking was a great foundation but you’re hungry to get closer to the action.

Why Other Fields Fall Short

When explaining “why PE,” you need to simultaneously explain “why not everything else.” Interviewers commonly ask why candidates aren’t pursuing hedge funds, VC, or staying in IB/consulting.

The key is to frame your responses based on factual differences between the fields. Resist the urge to bash your current role or competing paths. Instead, highlight a few objective reasons PE is a better fit:

Versus IB/consulting: You want to apply your modeling/strategic chops to investment decision-making, not just advisory work. Being an investor and partnering with companies long-term is more appealing than short-term projects.

Versus hedge funds: You want to be an active, not passive, investor. Analyzing businesses in-depth with access to private information and shaping their trajectory is more interesting than trading based on public data alone.

Versus VC: You’re drawn to investing in proven, cash-flowing businesses, not speculative startups. Performing due diligence on established companies and helping them grow fits your risk tolerance and skillset better than the home run-or-bust VC model.

The Bottom Line Answering “why PE” is not about spinning an amazing story. It’s about demonstrating you understand both the role and yourself.

Proving you’re running towards PE, not just running away from banking, is the key to a successful response. By combining a few of the points above with your own personal flavor, you’ll have a concise, tailored answer that positions you as the right candidate for the right reasons.

Focus on articulating PE-specific ways you’ll add value and grow as an investor. Touch on a few aspects that make more sense for your skills and interests versus adjacent fields. Wrap up in under 30 seconds.

Check these boxes and your “why PE” answer will be smooth sailing. Then you can get back to more important things, like deal discussions and LBO models. Follow this approach and you’ll soon be joining the private equity big leagues.