Private Equity Careers: The Ultimate Guide for Private Equity Jobs
Are you wondering how to get a job in private equity?
Private equity careers manifest ambiguously, which may lead to you needing clarification and wondering which path to take.
In this post, I will clearly distinguish the concepts of work in the Private Equity Career and Equity Research Career to help you determine the difference between these professional straight ions.
Work in the era of Equity Research is an analytical position. It considers the conduct of professional activities in the sifting of the stock market, which is often reduced to the sifting of securities.
Sifting securities is a set of different actions. It usually consists of the following elements (phases):
- collection of data on a financial instrument (security);
- data processing in one of several ways;
- description of the data;
- conclusion - the sifting of security.
What Is Private Equity?
Alright. Let's start with the beginning. What is private equity?
It's a general financial term that we use to describe any funds you can think of that can be used to pool resources from investors.
Said resources will then be employed to buy stakes in different companies.
If you're also wondering what private equity is and how it works, that's also a great question.
As you might have already understood, private equity companies are, of course, private.
This means they are run and owned by the same people who founded them, their managers, or sometimes by a small clump of investors. At the same time,
private equity companies are not traded on the stock market, making them private and not public.
What do private equity firms do? - A private equity company buys smaller companies that might be somewhat struggling or, if they are not, that have the potential to grow.
The private equity company gets them out of financial trouble, grows them, and resells them to another company o makes them public in any way they can.
Do you want an example in case you're wondering how private equity firms make money? If you are already in the industry, you probably know many.
But if you're not, you might still have heard of the Carlyle Group. They became one of the most prominent private equity firms in modern history when they were called out by none other than Taylor Swift.
As the media reports, the singer's former manager, backed up by the Carlyle Group, owns her music catalog and was trying to stop her from playing her songs.
This would have been a legal battle played backstage, except that Swift made it public. As a result, crowds of fans and American senators turned on private equity firms and their practices.
But are their practices bad? Let's look at some types of private equity to understand better.
Types of Private Equity
Before you can even start thinking about any private equity careers, you have to learn what the different private equity strategies are.
And that's where you can count on me! If you want to learn more or have questions to be answered, you can also take the BIWS' self-learning' financial training program.
It's easy and fully downloadable, and you get a certification when you finish!
Type 1: Venture capital (VC)
This means investing in small companies or startups with close to no profitability.
The goal is to generate a return by growing this asset and then profiting if the exit is successful.
However, distinguish private equity firms from venture capital firms!
A private equity company can buy another company from any industry. A venture capital firm can only buy startups from within clean technology, biotechnology, and technology, which makes them somewhat limited.
Type 2: Real estate private equity
As the name suggests, this private equity strategy refers to pooling all capital from investors and directing it toward real estate properties.
The strategy in itself comes with four sub-strategies you need to know about if you're interested in private equity careers or if you want to work as a real estate private equity analyst:
- Value added
- Core plus
- Growth capital
This type of investment is directed toward mature companies with proven business models and looking for capital to enter new markets or finance their latest acquisition. We call this growth equity.
Type 3: Mezzanine financing
This situation allows a company to take on debt capital, giving its lender the right to turn into an owner or a leader if that loan has not been repaid on time. Or if it was not compensated in total sum.
Any company that wishes to embark on mezzanine financing must be respectable in its industry and have an already established product and a good expansion plan.
Type 4: Private equity leveraged buyout (LBO)
Also known as LBOs, are typically conducted when a company has already borrowed a large amount of money to acquire yet another firm.
This is when a private equity company steps in for a buyout if they believe there is value in managing that company for a certain period.
Type 5: Fund of funds
This investment strategy asks for capital to be invested in other funds, not in bonds, stocks, or securities. This way, investors get a diversified and more secure portfolio with a lower risk.
Type 6: Special situations
If you are familiar with the financial terminology or literature, you might have already encountered them under the name 'distressed private equity.'
Special situations funds are meant for companies needing a restructuring or that find themselves in an unusual set of circumstances.
The investments will yield a profit from that change in valuation resulting from the unique situation.
Working in Private Equity
Knowing the theory is essential, but I understand why you're here. You want some answers. So let's start with a simple question.
What is it like working for a company owned by private equity?
This question is the same as asking what's the difference between working for a public and a private company.
Of course, it all depends on you and what you do, which means at what level you currently find yourself.
The second thing you must be aware of is what the private equity firm is planning on doing with your company.
If you are in the stage where they are growing it, you should be fine. However, you will have new bosses if they plan on selling it. If they dissolve it, you will need a new job.
But how about if you want to get into private equity?
How to Get into Private Equity
I have one word for you.
Yes, that's the hard truth. Private equity is one of the most rigid branches of investment to break into.
And most of that is due to the candidates needing the right background per the requirements.
Let's start with your education.
Private equity careers begin with an excellent educational background. What does that mean?
A master in finance
This is a must if you want this type of career. Please be aware that more than a bachelor's is needed for this job. If you already have a bachelor's in finance or are thinking of getting one, the master needs to follow it!
An MBA from a good university
The reason why I mentioned the university is fundamental. I could have just told you that you should get a master's in finance, but no.
The reality is that private equity firms only select candidates with degrees from certain universities. They include Harvard, Oxford, Cambridge, Wharton, HEC & ESSEC, and INSEAD. They won't be picky whether you studied in Europe or America, but they will need you to have graduated from one of these universities.
The Chartered Financial Analyst qualification requires four years of relevant experience in this field and three challenging levels to be cleared before you can get it.
Therefore, it's not for everyone. But you will need it if your mind is set on private equity careers.
These additional qualifications are not mandatory but will look immensely good on your resume. Go for them!
Private Equity Skills and Experience
- Candidates who aim to latch on to these desirable private jobs must show solid work ethics and multi-tasking abilities.
- They should be able to work efficiently individually and as part of a project team with the least amount of supervision.
- They must have robust general knowledge of various industries, finance, accounting, and other financial concepts.
- They are expected to show tactical and original thinking abilities.
- They should have outstanding communications skills (both written and verbal)
- These candidates should exhibit good academic aptitude, and strong quantitative skills (which include financial modeling skills and valuation skills)
- They should have a positive attitude and should readily accept responsibility and accountability for projects.
- They are expected to be well-versed in the Microsoft Office suite.
- They should be open to traveling in both domestic and international sectors on short official visits.
- Due Diligence skills
Education and Experience
Most PE firms prefer candidates with strong academic backgrounds and at least one to two years of relevant experience.
MBA graduates from reputed business schools are given preference.
Excellent communication skills (both written and verbal) are an absolute prerequisite as a private equity job is a client-facing job.
So now that I have mentioned the skills required for getting a private equity career in detail, let me synopsize it for you so that you can prepare yourselves for these kinds of jobs:
Key Skills Required
Knowledge & experience
As I mentioned above, you must have adequate knowledge of the finance sector and the private equity industry.
Relevant work experience is also of immense help as being a part of the finance industry will increase your possibilities of getting an excellent job in a PE firm.
Most reputed private equity firms prefer hiring aspirants with experience working with smaller private equity firms or financial institutes.
Ability to research and analyze
A significant chunk of your time at a private equity firm will go into analyzing enormous financial data.
You will be expected to conduct complex analyses on sheets and financial data.
Though most private equity firms have internal training programs, it's always a good idea to hone your financial analytical skills and strengthen your CV before you apply for these jobs.
You could visit our previous article 4 ways to learn financial modeling in excel,' to understand ways to increase your knowledge in financial analysis.
Also, it will help to improve your research skills and increase your understanding of various sectors or industries.
Having explained what private equity firms expect from prospective candidates and how they should prepare themselves for these high profile high-paying jobs, I'd like to clarify that this job is not for the feeble-minded.
It entails long grueling office hours, hours and hours in front of excel sheets, extensive traveling, negotiating with aggressive investment bankers, and lots and lots of stress.
So for young graduates with no work experience, I advise you to make sure you fit the bill for a private equity job. Decide if this is what you want to do.
Do not run behind it because your friends are running behind it.
If you want this job, then prepare yourself for it methodically.
Do not directly gun for the biggies in the industry. Instead, target smaller private equity firms where you can learn and grow quickly. Once you have the basics right, then you can target the big firms.
Finally, I hope this article helped you understand the world of private equity, and I wish you all the best in your quest for that coveted job as a senior associate in these companies.
Of course, for Managing Director or Partner and other senior roles, you must focus on networking and human relationships.
Post MBA Private Equity: What Are Firms Looking For?
As we've already seen, private equity firms are challenging hires. In other words, they are incredibly picky with their candidates, and the requirements are through the roof. So who do they hire, then?
- Investment Banking Analysts - You have a shot if you have already worked at a bulge bracket or an elite boutique bank.
- Private equity professionals who are already working at smaller private equity firms.
- Undergraduates at one of the universities I mentioned above for junior positions.
- IB Analysts from boutique and middle-market banks - please consider that this practice is primarily true for smaller firms.
Alright, so there is no hiring if you don't have banking experience? I'm so glad you asked!
How to Get into Private Equity without Banking Experience
First, I need to state this outright because I want to be as transparent and honest with you as possible.
If you are still looking for yourself in one of the categories I mentioned above, you could still aim for a private equity career. But you will likely get a job at something other than one of the firms.
Don't get discouraged! I am not trying to push you away from private equity careers!
But remember what I said in the beginning. It's all about the background.
Your education is crucial. You need a master's degree in finance, and an extra certification, to go through a private equity internship and the BIWS training program.
But do people get hired without such a background? Sometimes.
Outside of the categories I mentioned, people who have private equity careers come from the following circumstances:
- Are not from the US or the UK - in other countries, it's a lot easier to break into the financial market, as there isn't much competition. And because none of the major private equity firms exists there.
- They come from fields closely related to private equity, such as direct lending, Big 4 advisory or lending, corporate development, or even real estate.
- They find jobs in small firms or with recently created funds.
Here's the most important thing - please be realistic about your chances, which brings me to this.
My Best Tips for Successful Private Equity Careers
This is, without a doubt, one of the most alluring branches of the financial domain. If not for the work, which is quite interesting, then definitely for the money. Most firms within this industry are ready to pay top dollar.
Plus, you get a bonus and incentives, meaning you will earn the big bucks straight from year one.
But, as we've already seen, the private equity career path takes work. Education alone takes years and years. It's challenging to get through and is extremely expensive.
Apart from that, private equity exit opportunities exist only for people with mad skills.
So here are my best tips for securing a position within this industry.
Forget about the online and go for headhunters
Ok, those were two pieces of advice in one, but I like you. So, you're welcome.
What does that mean?
As I'm sure you know, the traditional way of getting a job in the modern age is to upload your resume onto every platform that will take it - monster.com, LinkedIn, and so on.
Forget about that.
Most private equity firms don't even have HR departments. They don't need one, seeing as the fierce competition, and they only hire the best.
This is not a game. Why would they bother with LinkedIn?
Think about it. It would be like trying to buy an expensive car and going on Amazon to find it. No, it would be best if you had a dealer.
And that's precisely what headhunter companies are.
But here's the trick. They won't come to you. In reality, you have to initiate contact with the headhunting company.
Send them your resume and cover letter, and maintain contact!
Don't let them forget about you, but don't be too persistent. Find that perfect balance between being on their radar and not seeming pushy.
Network as early as you can
There's a trick here. First, you must understand that private equity firms are not interested in hiring college students. Not even college undergraduates or graduates. Not even if you are attending a prestigious college such as Yale or Harvard. They want someone with experience. It's ok. Learn to deal with it.
However, applying for a private equity internship can bypass the system. They are vital.
The primary purpose here is to show potential employers later that you are not just some college graduate looking for entry-level private equity jobs. You already have experience. You've been out there, and you've done it!
Patience, patience, patience
I don't have enough words to stress how important this is. Private equity careers are not something you build in a day. And a job in private equity is not something you get overnight. The reality is far from that.
Most private equity firms start their interview process in January for the candidates they need the following July.
Yes, you read that right. It will be a whole year and a half before you start the job, even if you get it!
Apart from that, the interview process lasts between 3 and 6 months. And it has 12 to 15 steps.
The interviews are very long and meticulous, including every type of question imaginable, as well as drug tests. Please be aware of that! And since we're on that topic, let's discuss interviews more.
Private Equity Interview Questions
As I mentioned above, this will be challenging. The interview will be complicated and lengthy, so you can expect the questions to fall into one of the following categories:
Questions about yourself:
- Why did you choose private equity?
- Why did you choose this firm in particular?
- Tell us about your background.
- What are your plans for the future?
- Your strengths and weaknesses.
Questions about the industry:
- What are the companies you would invest in?
- What industry is the most appealing to you?
- Are there markets that mainstream investors view incorrectly?
- What criteria make a market appealing?
- Questions about merger models
- Valuation or DCF analysis
- They might want to test your mental abilities by asking you to do some IRR math
- Critical thinking questions that are similar to investment banking ones.
Questions about clients and deals:
These won't be questions per se. You will have to tell the story of at least two clients, the private equity due diligence that you did for them if you found any mistakes there, and how much money you were able to save for them.
Here's my tip - always offer critical views of all your clients in an interview.
If you acted like a private equity firm, would you have bought them, and why?
They will ask you these questions anyway, so surprise them by offering this perspective in advance.
Modeling tests and case studies:
There is no telling here precisely what you will be subjected to. Some candidates report that their paper LBO models lasted 30 minutes, while others were tested for weeks. Therefore, brace yourself and study hard.
Real estate private equity interview questions:
- Can you name a few primary real estate valuation methodologies?
- List the major real estate sectors according to risk. Tell us why.
- If there was an economic downturn, what asset would you like to own between a residential building, a hotel, and an office? Why?
What Are the Top Private Equity Firms that Are Hiring?
We've seen what you need to do to ace your interview, but what exactly should you aim for? Here are the major companies you could build your private equity careers around.
- The Blackstone Group Inc. - $571 billion in AUM (total assets under management)
- Neuberger Berman Group LLC - $356 billion in AUM
- Apollo Global Management Inc. - $331 billion in AUM
- The Carlyle Group Inc. - $224 billion in AUM
- KKR & Co. Inc. - $218 billion in AUM
- Bain Capital LP - $105 billion in AUM
- CVC Capital Partners - $135 billion in AUM
- Warburg Pincus LLC - $58 billion in AUM
- Vista Equity Partners - $52 billion in AUM
- EQT AB - $45 billion in AUM
Top Middle Market Private Equity Firms
- Wynnchurch Capital
- Abry Partners
- Court Square
- American Securities
- Cortec Group Management Services
- Graham Partners
- Sentinel Capital Partners LLC
- Clearview Capital
- Industrial Opportunity Partners
- TSG Consumer Partners
Working in Private Equity
Let's look at a few jobs you can have when you go for a career in private equity and what they consist of. This way, you will get a taste of what an investor does in this field!
Private equity portfolio management
You will have to conduct extensive research as a private equity portfolio manager. Your goal is the perfect investment decision for the fund under your control.
Meet with analysts and clients, check the markets, keep up on the news, and generally buy and sell as the market fluctuates.
Operating partner private equity
You will need to provide human capital as well as deal flow. You will be integral to thesis validation regarding due diligence, investments, and 100-day teams.
Private equity investor relations
As an investor relations specialist, it is your job to bring in investors and keep them interested in the firm. Yes, this is the big one! The most important and the most coveted position at the same time, so get ready!
Tell Me About Private Equity Deal Origination
Why tell you when I can show you? Here is a timeline I made especially for you of the negotiation and closing of a private equity deal origination.
Tell Me About Private Equity Fund Structure
Sure! But first, take a look at this. Here you have a simple diagram showing how a private equity fund works.
The structure of a private equity fund is that of a closed-end investment vehicle.
It starts as a limited partnership headed by a fund manager who also makes the rules and governs it. He is the General Partner and contributes 1% - 3%.
The rest of the investment comes from pension funds, universities, families, etc. They are the Limited Partners. Their liability is proportional to how much they have invested.
The investment period is between 4 and 6 years. Once the company that was bought has grown and can be sold, the profit or proceeds are distributed back between the limited partners.
Private Equity Careers FAQs
We've reached everyone's favorite part. Let's do a lightning round of FAQs to ensure we have covered every topic you could have in mind.
Private equity vs hedge fund - What's the difference?
As we've seen, private equity firms invest directly in companies. They buy private companies or even a controlling interest in a public firm.
On the other hand, hedge funds are considered an alternative type of investment. They utilize pooled money and various tactics to ensure their investors have returned.
Private equity vs investment banking
The difference is, once again, all in investments. Private equity firms invest much of their capital in buying companies that are privately held.
On the other hand, investment banks are more of a middleman. The market shares belong to public companies in a sell-side function.
Private equity vs asset management
Once again, as noted above, private equity companies need to raise specific capital to invest in an individual company.
When they do, they essentially buy out that company. They 'take ownership position' as we say in a more financial lingo and asses their control.
As opposed to that, an asset manager is a person who owns investments. Examples include bonds, stocks, partnerships, and more.
As you can see, there is a certain amount of overlap between the two grey areas, but they are not the same.
Consulting with private equity
Can you get a job in private equity as a consultant? It depends. If you have private equity consulting experience at a major firm, then yes, your chances are solid! However, being a consultant at any company considerably lowers your shot.
Investment banking to private equity
Yes, this can be done. In fact, according to studies done by a few recruitment companies, some 36% of all junior investment bankers turn to private equity. Why not you?
Corporate development to private equity
If you read this article carefully, you might have noticed that I mentioned corporate development once before as an ideal possible background for private equity careers.
Therefore, the transition should go well!
Equity research to private equity
Private equity firms will hire you based on your equity research background only if it makes sense for them from a strategic point of view.
Suppose they focus on a specific sector and need you and your expertise. Otherwise, this is a very unusual move, so don't bank on it!
What Is the Necessity for Equity Research Specialist in Securities Analysis?
Any Equity Research aims to predict the future behavior of the price of given security with the highest accuracy.
Without analysis, investors (employees of Private Equity, which we'll talk about later) and traders will not have relevant information about the stock market, i.e., they will have no information realm for making managerial decisions.
Since the most promising crews can end in failure and small teams can quickly and unexpectedly start adding interest points to the value of their shares, anyone has to know the state of the market.
Information about the developing crews and which ones are entering a protracted downward trend in business activity is always needed.
Criteria for Selecting Crews for Private Equity Careers
#1. Stage of development
Private equity firms choose in favor of the crew which is at the stage of expansion. Young firms that have recently started to operate or are just planning to open are unattractive to depositors.
Firms choose about 90% of associates at a mature stage. Below is the statistical data on implementing the crew's choice by private equity funds through associates.
The birth stage. If the organization's existence is up to 5 years, about 43% of investors are ready to invest their funds to support the crew's development.
The development stage. When the selling capacity increases by 15% per year, about 93% of private equity funds will want to place their capital.
The period of maturity. When selling capacity increases by less than 15% per year, about 71% of private equity investors consider financial investments in the crew profitable.
Investors' interest remains at the same percentage level during the flourishing stage of the enterprise (when its sales again increase by more than 15% per year).
Only 7% of investors are ready to support the crew at the recession stage.
The FMCG (fast-moving consumer goods) sector is preferable for equity firm raises. Teams operating in a low-profitable industry or with a long operating cycle will be less interested in the investor.
The rate of return on investments plays a vital role in the choice of an endowment object, and an experienced specialist must take this into account without fail.
#3. The amount of investment
The next indicator the specialist pays attention to is the amount of money required.
Each organization that finances business has its sufficient volume of straight investment. 36% consider the maximum amount of assets to be 30 million US dollars. 29% of private equity funds are ready to place up to 50 million US dollars in the enterprise.
The boundary of 10 million is possible infusions for 21% of similar organizations. 14% of depositors have cash of up to 40 million US dollars.
#4. Level of control
Providing a blocking stake may require 21% of endowment funds.
This means that the depositor will cooperate only with the firm that will transfer to him from 25 to 49% of the votes in the shareholders' meeting, that is, in the supreme governing body.
Such private equity funds show interest in the crew's management. At the same time, senior managers will be responsible for the firm's functioning.
Also, to decide on investing money in the development of the crew, the Associate must analyze the presence of the following leading non-financially measurable indicators.
This is a competent team of employees, rapid growth, and a profitable competitive strategy.
The goals and objectives are the same. The main one is to provide the endowment crew with the proper endowment object with the opportunity for growth and development, thereby increasing the value of its shares and, subsequently, the profit of the investing entity.
Differences in the function of Private Equity and Equity Research Career (Jobs in Private Equity )
The professionals in the Private Equity company should be able to help the head of the firm to find the correct decision aimed at the rapid growth of the enterprise, get an evaluation of the endowment project to attract other investors, or assist during the acquisition of shares of other firms.
At the same time, the analyst in Equity Research works only within his firm and has practically no contact with the investee, with the rare exception of obtaining insider information.
For a specialist representing a straight investor, it should not be an obstacle to the fact that the structure of the organization is complex or it consists of a variety of offshore crews that may also not be transparent from a legal point of view.
The level of knowledge in this industry should be at the level of the firm's leading lawyers.
The specialist in Private Equity should be aware of the rules of accounting according to international standards and advise the endowment object to restructure its internal accounting policy to record these standards if such a transition is economically feasible.
Also, an Associate must necessarily facilitate the conduct of an international audit.
A transparent accounting system and the formation of stewardship reporting will give a clear idea of the state of solvency and financial stability of the firm's investment.
And already, when the specialist receives the profits for the endowment fund, very often, after the project is completed, new cooperation begins with the same endowment objects for other projects.
Thus, the Associate should also have the ability to conduct business relations on a long-term basis and be able to build practical activities that will be based on trust.
An associate belongs to a stewardship position and may have several analysts at his initiative. At the same time, the analyst's function has a different scope, and the responsibility is much smaller.
However, these positions do not mutually exclude each other but supplement.
Youngsters, primarily fresh graduates from MBA colleges, often come to me for advice and the dream of getting opportunities in pe firms or venture capital jobs.
But most of these youngsters need to learn what a private equity firm does or what it takes to get a job with a private equity firm. They are drawn to this career path more for the money and glamour associated with this profile.
So I'd like to explain what private equity firms do and what a private equity job description looks like.
Private equity firms obtain capital from HNIs (high-net-worth individuals) and use it to invest and acquire equity stakes in other companies.
Key players in private equity are institutional investors and qualified investors willing to commit considerable sums of money for extended periods.
The average duration for any private equity deal varies from 5 to 7 years. After this period, the private equity generally sells out through an IPO (initial public offer) contract or through a stake sale to earn huge profits.
Key Indian private equity firms include Baring Private Equity Partners (India), Chrys Capital, Cipher Securities India Pvt Ltd, ICICI Ventures, and IDFC Private Equity.
Now that we understand exactly what a private equity firm does let's try to understand how private equity headhunters define a private equity work description.
Private Equity Analyst Job Description
· Monitoring current investments under management
· Finalizing quarterly and yearly reviews of funds and companies in the portfolio
· Create & update valuation models and projection models for portfolio companies
· Assist in due diligence, review & study of potential new investments
· conduct detailed research on target investments and create fundraising collateral
· research, transcribe & present industry studies to detect possible areas of future investment
· Prepare detailed information memorandums
· Review legal documentation and deals
· Build portfolio analysis & performance metrics
· Interact with senior members of private equity firms to acquire intelligence on existing &potential investments
· Complete additional duties as requested or allotted
Ok...Now, let's look at what desired skills and experience; private equity firms expect from potential or prospective candidates.
Investment Banking Vs. Private Equity Careers
Tasks in investment banking include deal pitching, Deals execution, finding detailed information, and helping Managing Directors in call preparation.
In contrast with investment banking, work in private equity includes possible investment screening, deals execution to make investments, taking care of portfolio companies, raising funds, and managing to sell portfolio companies, also called exit strategies.
Investment Banks and Private Equity Funds are both rewarding career paths.
Did I Forget Anything?
There you have it, a short guide on getting a job in private equity and investment banks. The jobs cover education, duties, management, work responsibilities, skills, and experience required.
I had a good time creating this post, researching the web for every little detail I could find.
Now, it's your turn to find the email address on the company website and apply.