A Private Equity Analyst or PE Analyst is a person who does research and analysis of private companies.
Financial modeling techniques are used by the analyst to determine the merits and demerits of investing in the stock of a certain private company.
As the term implies, a private equity analyst works with private equity firms.
These private equity firms manage investment funds or portfolios of private companies.
They perform due diligence, financial modeling, financial analysis, and valuation of the companies where investors are willing to invest.
In valuation techniques, Discounted Cash Flow (DCF) and Internal Rate of Return (IRR) techniques are frequently used.
Since there are no fixed determinants of the stock value of a privately held company, it becomes the most essential factor for a private equity analyst to accurately value the common stock of a business before delivering investment recommendations.
Private equity firms hire equity analysts to help them maximize their investment portfolios using the best financial models.
As such, the firm may wish to allow another corporation to acquire the company, recapitalize the enterprise or even venture into an Initial Public Offering (IPO).
The tasks performed by an equity analyst depend on the selected investment strategy of the private equity firm.
Private Equity Analyst Job Description
The private equity analyst provides analytical and asset valuation support for the company’s Private Equity and Trading groups.
The analyst provides input for strategic development and acquisition opportunities within the specific industry.
The person develops and implements specific hedging strategies for various regions to maximize profits and minimize price volatility for the private equity funds.
A detailed review of the financial statements of the company under consideration is undertaken by the PE analyst.
The main objective is to determine whether an investment by the private equity firm in the company would further the investment intentions of the firm or not.
Effective management of industry-specific trading activities to ensure compliance with the company’s financial, risk, and strategic objectives are part of the job description too.
The private equity analyst has the function to review and process potential new private equity investment opportunities.
The analyst conducts in-depth research, monitors portfolios, reports development, and monitors business growth.
Further, if the intention of the private equity firm is to change the capital structure of the company through its investment, then the work of the analyst involves assuming a set of financial variables and preparing financial scenarios.
As such, it becomes the task of the analyst to recommend strategies for the highest return on investment (ROI) and an apt mix of equity and debt instruments.
Lastly, reliable valuation measures are used by the private equity analyst to assess stock value and ensure fulfillment of expected profit margins.
Now, let’s look into what a private equity firm would look into before hiring an equity analyst.
Skills and Education of a Private Equity Analyst
Breaking into the private equity sector is tough.
It is nonetheless challenging to get a job and the sooner you accept this challenge, is better for your career.
A background in commerce or to be specific, finance is recommended.
Getting an MBA degree is recommended as well.
In private equity jobs in London and the USA, a person with a Bachelor’s degree can gain a break into the private equity sector.
At the starter or fresher level, the experience can be bypassed if the candidate shows good skills.
You should possess strong knowledge of different industries like equity firms, investment management companies, and their business models.
You should be adept at handling multiple tasks, logical reasoning, due diligence, and analytical reasoning.
You should have a high energy level as the work hours are typically long.
Further, a person with excellent spoken and written communication is preferred.
Needless to say, self-motivation and being a self-starter are important too.
You should be able to build positive and productive relationships, have professionalism, practical judgment, and integrity and be result oriented.
You need to have good knowledge of private equity firms and their portfolio companies, investment banking, and the venture capital landscape.
Lastly, knowledge of Excel, MS Word, and PowerPoint is an added advantage, hinting at your competency levels.
If you are experienced, a year or two in structured transactions, banking, consulting, trading, or analytical experience for a specific industry is valued by the recruiters.
You can get more information on the private equity industry and being a private equity analyst on websites such as VC Circle and Private Equity.
Private Equity Analyst Jobs and Salary
Jobs in private equity are rewarding.
Make an early start and go for internships while you’re still studying.
It will gain you an advantage over other applicants when you finally venture toward full-time employment as a private equity analyst.
Don’t avoid campus placements.
Top and mid-level equity firms prefer to hire candidates from campus placements.
As such, keep a watch on on-campus recruitment announcements.
If you are going for direct recruitment, give extra focus on crafting the perfect resume.
Don’t ever create generic resumes as they mostly go into trash bins!
Mention relevant skills and experience.
For instance, a financial consultant will mention information about financial projects or a business development person will talk about business acquisitions, or a banker would talk about restructuring deals, investment banks, and so on.
I hope you’re getting the drift.
The financial remuneration depends on your skills, education, and experience (if any). Of course, the geographical location matters too.
According to PayScale.com, private equity analysts with 1 or 2 years of experience in Mumbai, India, earn anywhere between INR 1,95000 and 10 Lakh a year.
However, an applicant based in New York, USA, getting selected for the same profile will earn around 50,000 USD to 87,000 USD a year, not to forget pension funds.
A private Equity Analyst Job in London earns anywhere from GBP 25000 to 75000.
Apart from salary, there are added benefits like performance bonuses, private equity investments, and other emoluments.
Are you interested in making a career in private equity? What is stopping you? I hope you are now clear about the private equity analyst career.
To help you put this advice into practice, you need to work on your skills.
Take the first step now!
If you take the time to implement these suggestions, you’ll be sitting pretty the next time you get an interview call for a private equity analyst job.
Hi, I’m Avadhut, Founder of FinanceWalk. We help you make a rewarding career in any field based on your Inner GPS 🙂.
Contact us for Career Coaching.