TA, Thoma Bravo help kick off ultra-early PE recruiting “circus”

Private equity’s mad rush to find the best young talent got an even earlier start this year, kicking off around mid-September, numerous sources told Buyouts. 

Firms are interviewing and making offers for slots in their 2021 associate classes to kids who just graduated from college in the spring. This process is happening just as the undergrads are starting their two-year investment banking analyst stints. 

This year, TA Associates and Thoma Bravo were among the early movers, kicking off the process that many other firms felt the need to jump in on so as to not miss out on future talent. Many other firms followed, including Warburg Pincus, Hellman & Friedman, Apollo Global Management, New Mountain Capital, KKR and TPG, sources said.

Last year, Thoma Bravo reportedly kicked off the recruiting maelstrom around late October, which several sources criticized as being too early. “People are not happy about it,” said one source with knowledge of the process. 

Even before the formal recruiting began in mid-September, firms held coffee meetings, drinks, breakfast and dinner events in August, according to an investment banking analyst who was involved in the processes and requested anonymity.

“Everyone in the industry thinks it’s a bit ridiculous,” said Jeff Noonan, an associate consultant at Bain & Co who went through the early recruiting process last year. “None of the firms wanted to interview this early and they think it’s unfortunate it’s creeping up earlier and earlier.”

Feeding frenzy

The process, known as on-cycle private equity recruiting, works like this: A day comes when suddenly a host of firms schedule interviews with tons of candidates over the course of a few days. The firms make fast-expiring offers to fill out their associate classes. Once one firm kicks off the process, other firms follow because they don’t want to miss out on future talent, sources said.

Ten years ago, this process started about a year into an analyst’s tenure at an investment bank, according to Scott Dinhofer, chief executive officer and founder of executive recruiter The Weatherly Group. Since then, it’s been moving up. 

“You’ve seen that date crawl forward over the last 30 years,” Dinhofer said. “Ten years ago it moved into the first year (of a two-year analyst job), and moved into March and June of the first year, and then crept up to, five years ago, kicking off after New Year’s.”

Earlier recruiting is challenging because the candidates have almost no work experience, meaning firms have to assess their potential based on interviews, on-the-spot financial modeling and analysis exercises, their track record at school, the bank where they are working and perhaps recommendations from their personal networks. 

It’s that network aspect of the process that some believe could be detrimental to the promotion of diversity in the industry, according to an executive at a PE firm.  

“It really benefits the kids with connections … ‘this guy was in my fraternity’ or that kid’s dad knows someone that helps them prepare for the interview,” the executive said. Those with such connections have an advantage over the “really smart person” who went to a state school in the Midwest and may not have the same network, the executive said. 

Tough interview

The process itself is daunting: “It was by far the most intense interview process I’ve ever heard of,” Noonan said.

Last year, Noonan was at home on a Saturday night getting ready for Halloween when a recruiter called around 9:30 p.m. and said a firm wanted to interview him at 9 a.m. Between 9 p.m. and 1 a.m., Noonan said he fielded a steady stream of recruiters trying to set up interviews for the next day. Candidates expect to spend five or six hours with a firm, so two or maybe three interviews per day is about the limit. 

Noonan’s mother drove him to Boston that night, where he got a few hours sleep before heading to the interview. The next day, he said he spent six or seven hours with the first firm, and then five hours with another firm. Luckily he got an offer and didn’t have to worry about Day 2 interviews. 

The interview process generally includes an informational chat with managing directors, then a much more intense interview with vice presidents or principals who grill candidates on technical aspects of the job.

The challenge for candidates can be that they spend so much time with one firm, they miss out on other interviews, and ultimately don’t get any offer.

“If XYZ PE firm needs to fill 10 slots, they call in 30 candidates and have them in conference rooms. They don’t have enough people to meet with them efficiently. Those candidates are sitting in conference rooms but they’re probably just backup for those firms,” the PE executive said. 

The undergrads themselves don’t necessarily have time to assess each firm or figure out if they even like the strategy, the executive said. Pressure is ratcheted up because firms make offers that quickly expire after a day or two. 

“Most people definitely don’t get time to do much research and have to go off of the coffee chats/pre-process events with the firms,” an investment banking analyst who has been through the process said.

TA, Thoma Bravo, Warburg Pincus and KKR decline to comment, while Hellman & Friedman, TPG and Apollo did not return requests for comment.

Off-cycle

Some firms chose to hang back this year and not participate in the recruiting frenzy. Silver Lake, Thomas H. Lee Partners, Searchlight Capital, Onex Partners and Oak Hill Capital were among those that didn’t participate, sources said. 

“It’s simply premature to ask candidates to make a decision roughly 22 months before they start—especially since in many cases they just moved to their current city a few weeks earlier,” said one person close to THL. “Assessing candidates recently out of undergraduate and training, with little deal experience, is not reasonable.”

More candidates are also choosing to hold out, the person said. 

Silver Lake, which has participated in early recruiting in the past, is focusing this year on second-year candidates who have built up some work experience at their banks, said a person with knowledge of the firm. 

Delaying the interviews will lead to better outcomes for the firm and for candidates, the person said. This will position the firm to make optimally informed hiring decisions regarding this pool and will allow candidates to make optimally informed career choices, the person said. 

Some of the firms that participated in early recruiting purposely did not fill their entire 2021 associate class, leaving slots open for candidates to come in later in the year. Noonan said this could be how the industry starts to put the brakes on the on-cycle recruiting process.

“That will ultimately break this momentum of going early,” he said. “Sure, there might be the initial rush of on-cycle recruiting but funds might only close a third of the class.”

Correction: An earlier version of this report included a misspelling of Thoma Bravo. The report has been updated.

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