Decoding Private Equity Interview ft. Kashica Agarwal | Warburg Pincus Associate | Ex-McKinsey | #E9

0:00 [Music] welcome to another episode of buy side hippies uh and today we have with us kashika agarwal extra family uh who will help us decode how to crack the private equity interview which is one of the most uh coveted jobs in india today so kashika i'll hand over to you uh if you can for the benefit of audience you can just introduce yourself and then we can get started here same hey everybody um

0:33 nice to talk to you again assume it's been a while i think since we have been able to catch up uh for everybody who doesn't know see when i went to the same college we were at stephens together he was studying maths i was studying eco and since then we haven't been able to meet for the last uh year and a half or so but right after stephens and i got into mckinsey did a couple of years there and i'm now

0:55 moving into private equity with warburg ah that's i think a little bit about me anything particular you want to start with a scene on the interview process otherwise we can just sort of dive into what sort of it means to be an associate and how did you look just to like or you know just to make a level playing field you can just you know help us understand uh what is private equity you know why is it so desired

1:23 like why is it from the most desired job in the world what do you guys do here i think um why it's most desired and what it is i like two different questions why it's more desired of course it's one of the most lucrative well-paying jobs out there in the uh space right now but also uh it's about just the quality of work right i think for people our age this amount of ownership independence and challenging work of

1:52 this kind uh is something that sort of private equity offers uh and then it sort of like also puts you on this path to getting a coveted mba that is so valued especially not just india but otherwise also you got it so what is private equity though like what do you guys do here so essentially it's about you so private equity and if i take the term

2:23 more broadly it's just about putting in money into a company and again this can be both an early state company or a more well-established mature company but typically in the more colloquial sense of the term it has now come to be identified with putting investment into more mature companies where the early stage companies have found a niche with venture capital firms um which to some extent can also be thought of as like a subset of the whole private equity space uh but

2:53 locally private equity is now putting money into the more well-established ones in terms of what the more day-to-day activities look like are um as an associate especially you will be doing due diligence of investments with a vice president or a principal in the fund and you will be managing a set of portfolio companies and part of these portfolio companies will be existing investments of the fund and part of them will be sort of investments that you have helped drive

3:22 as part of your associate and you're there got it got it so albert kasich i just want to understand you are anyway in mckinsey which is one of the you know the most respected and the most prestigious or consulting firms in the world so but why did you essentially make that switch uh to uh private equity what was your reason yeah i think consulting what it really offers you is this like you know space to explore different industries

3:52 and explore different functions within each of these industries so um over like my one and a half years or almost two years now at mckinsey i've seen some six seven industries and looked at both cost side looked at diligences looked at revenue side growth uh distressed assets right all of that so i think diversity is what consulting really offers and the thing that comes with diversity is a very steep learning curve right every three four months you're

4:19 expected to jump into an entirely new function in industry however what ultimately happens is that you're a strategic advisor to another client who's the actual owner of the problem statement and as carefully as we may like to advise and as much ownership as a consultant would like to take off that problem statement it's ultimately not yours and this is something that i sort of wanted to explore as like the logical next step is to see you know

4:44 what happens when i have to put money where uh on what i'm actually suggesting and how do i is the learning really that different and uh is my behavior really that different can there be like oh growth there and so i was like you know let's try to move into the investment space and with an investment then um i was pretty sure that you know deeper analysis and deeper insights are what interest me and not so much uh more i would say more

5:12 of the vc or startup focused investments and uh sort of like okay let's try for private equity then got it i also feel like you know since uh college you always had an inclination for finance i uh just to pull it out that you were heading the finance uh sell off stephen so i mean i'm sure you know this was a natural transition to high finance now where you'll be making these crazy decisions i guess uh for

5:38 yeah so cool congratulations again uh and you know now i want to uh you know get to the juicy part of the uh this podcast so uh kashika a lot of like people don't understand how does a private equity hiring works like you know in india there's very little information and mostly people who are in these like uh prestigious uh firms like the mbbs would even get a chance to do an interview so you know just uh so that you know we

6:04 make a level playing field can you please help me understand you know how does a private equity you know hiring cycle look like and how you know for example it was a co-video so i'm sure like there were some adjustments to the hiring cycles but you know if you can just throw some light on how does it work out yeah no that makes a lot of sense let's get to that um so i'll talk about what the process

6:28 in itself is and then sort of we can talk about what's the background prep that sort of expected and uh how to go about it yeah so just in terms of the process they typically hire from uh two batches of people one is um the start the consultants but also the investment bankers or other existing private equity slash vc funds this is the group of candidates that they look at and for the associate role of the pre-mba associate role

7:00 they look for people who've been in the workforce for around at least a year a year and a half when they come to interview you they will prep for like uh folks who haven't spent as much time so typically at like a six months eight months one year mark is when they come to interview you and they give you an offer which is generally um six to eight months out so you end up joining the place so it's

7:26 very similar to how campus placements work right at a lot of these prestigious universities you're hired six to eight months before you to actually join the place that's also uh how it works and how these firms generally approach you these funds generally approach you are through headhunters so a headhunter will typically reach out to you on your uh firm email personal email or contact number will be found somewhere and we'll tell you about this opportunity the company really

7:52 directly reaches out to you some of them like blackstone have like a more direct process but as a rule of thumb it's through a headhunter and it's sort of undervalued but it's also like a good practice that as you're going through the process you maintain a good relation with your headhunter point of contact it plays in very subtly right you know sometimes they drop in hints about when the time what the timelines are looking like or what the fund is talking

8:16 about uh if you sort of have a good relation so i always sort of place to i wouldn't say like a direct advantage but just in terms of keeping you updated and helping you figure out which funds you want to prioritize um that's what uh and just in terms of what the process is right there's a bunch of these interviews that take place there's some eight to nine interviews that they'll definitely take before they give you an

8:42 offer and the idea is that all of these funds actually have small teams so it's a team of 20 people right uh typically in a fund that's the core investment team out of which you can say like seven eight or like eight to ten are associates and ten and the remaining ten twelve are the leadership so the idea is that they want you to meet as much of the leadership over these interviews as possible because you'll end up working that these

9:06 ten people that you'll be working with over the next two years right so they're trying to make sure that all of them find you compatible enough and all of them find you good enough and like can vouch for you come into the fun got it got it so for you especially did you or did you have these nine rounds of interviews at warwick pincus or how was it for you like so actually i didn't have all nine before uh before i got the

9:31 offer i did some five six i think before i got the offer and then i met uh the three other md's after i got in the offer so we did that ended up becoming more like a catch up and like an introductory call rather than like an interview per se but i did meet uh all of them before like say my start date got it got it i know i should have asked this before but now i'll ask

9:56 you know did you get uh this interview did you approach warwick pinkers directly or did he go through a laura's through her head hunter you know these headhunters will reach out to the large almost all of the bats right they reach out to the imdb badge they reach out to like the um folks at the top investment banks and they reach out to a few other p fund analyst and they sort of contact you um i'm sure they can you can always like

10:21 drop in a message to them and they could i'm sure take it up that way also but this is how it's typically done the headhunters do like one round of screening contacting whatever at that their end and then the fund receives the resume yeah this is very interesting inside you just told me you know uh which a lot of people won't even know if they are not part of the this prestigious elite group of mbbs is you know

10:47 you get an offer a year probably before you actually join the firm you know and someone who wants to let's just switch after let's say two years of you know consulting at a tier two consulting firm or investment bank they won't even know about it because when this startup is already too late the process is only going to happen so again exactly so that is a great insight you know like you're putting out so kashika now or can you please help me

11:10 understand what was your interview process like what were the rounds uh like what did they ask you was it a modeling test you know just generic questions which people would really want to know here yeah no make sense so typically your interview yeah there was a modeling test but a modeling test is not like something that all funds do and the modeling test was after like you know all of my interviews had already been taken so it was towards

11:36 the end of it yeah it started off of course it starts off with like a cv shot list after the series shortlists uh you know these interviews start round one of interviews is where you know there are two three interviews where they sort of give another round of short lists after which these bunch of other three four five six you know and this can be the candidate to candidate and fun to fund but the other set of interviews so to

12:00 say um enough so what the content of the interview in general is um i'd say that there are like you know three parts to it one and the the first and the most important part of the case itself and let's circle back to it and like what it really means and the second part to it is the technical or the more finance specific knowledge and lastly hr right i think by now you like a candidate that is appearing

12:26 for this will typically be somebody at like a one of the consulting firms or an investment bank right so they typically now know how to answer our questions so i think that we can sort of skip uh but maybe we'll circle back to the whole case scenario right anybody who's appeared for consulting interviews or the consulting cases are a lot more structured there like all of these resources and books that you can refer to for private equity

12:52 or venture capital for that matter i think resources are not as structured it doesn't say that you know these are the five types of cases this is the framework this is how you approach it here is a list of 30 sample cases that you can look at to practice right it's not that structure at all um and the case question is very different from like the consulting case right you're not being asked like how do you increase

13:12 profits of this company or figure out how to enter a market or stuff like that right you're being asked very one specific question which is to say that would you invest in this particular industrial company or not and the answer really is on like you know what are the factors that you will look at for that particular industry to figure out uh whether it makes sense to you um and of course like the answer and they

13:37 don't expect you to know everything about every industry so it ends up becoming a case where you're sort of asking the interviewer insights that you think can help you get to that answer got it that's one part of it uh but there's of course like there'll be industries that you would have worked on given your one and a half two years of working experience and uh on those industries they'll expect you to have an answer so when i was studying for interviews i

14:03 had already worked on like four mckinsey projects in four different industries so i was expected to know like whether um i would go and go ahead and invest in that industry and if i would like which are some of the companies that i would consider investing in got it got it interesting really interesting so kashika according to you which was uh the hardest part in this whole interview process was the modeling round was the hr was it you know convincing

14:31 these guys that you know your thing or was the or was it the investment case no i think i think of course the investment case is like the toughest but in terms of had look like pick one incident i'm not sure if you know but like bengal had this massive like uh um fun which came up it was a hurricane a couple of months like a couple of months back this was exactly around the time when my

14:56 interviews were happening so i have this like crucial round with uh principle at the fun and this is my second last interview so you know you sort of like as you go through the interviews you start feeling like this momentum building up you can sort of see whether this round is crucial or not and um it ended up falling on the same day as being always expected to be hit with this hurricane right um so i'm

15:21 at my place sitting on my uh desk trying to give this interview while windows are banging outside light poles are falling trees are falling windows are flying out ceilings are flying out i'm not sure if you've seen some of the more crazy videos of like buildings being set on fire by like falling electric lines uh cars like getting moved and all that but uh that's what was happening in the background while i sit in front of that

15:49 window and try to give this interview um although i like you know wishing that all of this is remote right with code and everything so all the while wishing that my internet connection somehow stays stable but um i think that was the one interview that i was most distracted and like most say uh not in the best presence of mind but damn fun experience my family is trying to like somehow manage the rest of the house with like things

16:18 flying around but here i to sit poised and like answer tell me about yourself and all of that interesting interesting i mean i hope no one goes through that but still a really interesting process of the interview experience i guess that's what it's even harder i guess with your oh this thing yeah but like almost seriously i'd say like prepare like candles should prepare for the investment case most seriously i think with technical financial

16:48 knowledge there's a lot of resources out there right as a consultant i think you're not the best place to sort of answer this as an investment banker i'd say you're a slightly better place but uh funds sort of know that right they don't get into too much details with consultants then but they expect you to sort of know basics right you'll be expected to know how the three statements interact what is enterprise value what are the multiples how do you

17:12 calculate uh how do you look at valuation dcf and vo and all of that but there's a lot of like online resources available and uh i think i can send you a few links that you could possibly add that would be great we'll actually put it uh out below you know for like benefit of people you know who are who want to really explore this uh you know space and i'm sure like they'll also reach out to you because i mean

17:34 you're a really helpful person as well so that's pretty cool like but tell me one thing how many people or did they actually uh you know give offers to because as you said it's a very small team of people i think that's with everything yeah and they manage billions of dollars you know so how many offers does let's say warwick pinkers give out every year yeah um typically they give out three this you know three offers three

17:58 two to three offers and i think that's the same across funds um they're generally two years of pre-mba associates each year has two to three associates and then you have the passing out year with some overlap with the your that's coming in um so two to three associates pre md associate scenario and you can think of it as like yeah they're so at least like i was approached by say four to five private equity funds so out there there are some

18:31 12 to 15 such offers being given got it got it so amazing yeah uh so tasha kylo like i just want to now touch upon uh if uh if someone you know start he's a pre-mba guy in consulting or investment bank and now he wants to start his process you know he joins the consulting firm what tips would you have for that person to start preparing for these coated positions early on i would say that there isn't a lot of

19:02 prep prep that is out of the way right avon you're obviously expected to know basic stuff about what's happening out there in the investment and the business world so i think the basic expectation is that you keep um up to date about that in these investment cases that you're expected to solve it won't be that you know you'll be expected you'll be expected to have in-depth knowledge of the industry but sufficient um for like a layman slightly better

19:32 than a layman maybe um second i would say that there's a slight advantage if like you've done like a diligence project at your consulting firm um i wouldn't say advantage like later on in the process but just the first hurdle of getting your cv shortlisted you get a slight preference if you've done like a due diligence uh project with your setting for commercial duties [Music] yeah yeah and besides that in terms of prep i

20:03 think it doesn't specifically matter if you've already thought about it before or not you can always think about it during your prep which is like whether you would invest in that industry or not but typically how consultants look at it and is a challenge in the industry well you're trying to solve like within a larger problem statement of the project you're looking at one specific workstream which means that you generally have like a much more narrower

20:25 viewpoint of the industry and sort of stepping back and looking at the bigger picture then becomes difficult because honestly you've never made the effort to do that while you were on the project so maybe making that effort early on will help on will help you as part of the process got it got it or there's something i uh wanted to understand with this has been going around in the market a lot for someone who crosses let's say two

20:51 years of work experience right uh do those candidates become less desirable to a private equity venture capital for nor is this just a myth so when you say has crossed two years of work experience i'm guessing this means that at the time of the interview which means that by the time they end up joining it will be at least two and a half years or three years two years into the job when they are taking these interviews

21:18 right foreign yeah so typically and i'll tell you like what the of course like the standard answer to that is like no of course we look at merit and talent but statistically there's a lower proportion of people who are recruited after the two-year mark and that's simply like you know it's simply because of the fact that they want after they've gotten an associate they want to keep them around for at least a couple of years right the idea or the most common exit

21:48 um that these associates make is that they go better than mba and at least like you need a four plus work experience to go get an mba and you want to get it done as early as possible at least that's what it is you're in this country right so associates will typically leave once they reach the four year mark the thing with taking in a two year like interviewing a two plus year candidate is just that

22:11 once they join there's a like a slightly lower amount of time that they can contribute to the fund then so the fund will end up putting an effort to train that associate but will end up not seeing as much time of the benefits of that and hence i think uh did i do like sort of interview folks for slightly early on in that in your no make sense and as you said they want folks to be around for like more time

22:37 uh do you guys have a i was structured tenure for a pre mba rule or you can stick around for as long as you want and can actually be promoted to a track role and don't probably need an mb as well if you can just provide some perspective on that yeah i think it depends fun to fund for example i know that um also but it's not as common but if you perform well there are track roles that some funds

23:00 provide for example i know that bain capital does that but i know also for a fact that warburg doesn't do that they prefer that you go get an mba and they'll be open to like taking you back after you've got an mba and take you on as a senior associate but not typically a track rule there might be a situation where like you know they might extend your stay by like say instead of two years it'll be two

23:21 and a half years or two years three months but i don't think there's like a change in the position that you hold you'll still be like a pre-md associate and not directly a senior associate got it got it and since you've now spoken about you know like going to an mba and then i get coming back if given a chance so here a lot of people especially consultants want to probably stick around in consulting because like for example a gain or a

23:47 mckinsey if you're a good performer they even uh fund your mba and you have to join them back with something but are these funds also as for giving as you know friendly or to your pre-mba or policy mba rule candidates or how does it work out yeah um so this it's true that they fund your mbas but honestly like after you've worked in like private equity or vce um you don't need to worry about like the expense of the mba then of course

24:15 um yeah so so it's so then it ends up being the same thing right they put enough into your pocket for you to fund it yourself uh versus the consulting firm who will which will like sort of fund it for you with like a lock-in period after that got it got it makes a lot of sense and uh kashida thanks again for doing this uh interesting podcast with us i'm sure a lot of people who are gonna watch it

24:41 um coming badges and you know they can take something from this interview which helps them later on as well in their journey so again thanks for coming here