What Does A Private Equity Analyst Do? A Complete Guide

The work of a private equity analyst is to use modeling techniques such as the LBO model or leveraged buyout model to improve profit and maximize an investment portfolio.

When private equity firms hire you, they delegate some responsibilities, such as:

  • Gather information and determine the valuation of an investment
  • Carry out financial risk assessments, prepare reports, and make recommendations
  • Design strategies that can help the firm secure more deals

You can picture one now, right?

This may sound interesting at first sight; however, there is more to this topic than meets the eye.

The very best explanations—and the ones that can help you understand the life of a private equity financial analyst—cannot be covered in a single paragraph.

That’s why in this article, I paint a clear picture of who the private financial equity analyst is.

I also provide additional information on everything that you need to know about this career.

Let’s get started.

What Does A Private Equity Analyst Do

Who Is a Private Equity Analyst?

A private equity analyst is a key personnel in a private equity firm who conducts research and analysis that inform investment decisions.

If you want to become one, I have explicitly discussed concrete steps you can follow in the article about How to Become a Private Equity Analyst.

Before getting into the nitty-gritty of this guide, let’s first take a look at what qualifications you need to break into this career.

What Are the Prerequisites for a Private Equity Career?

Let’s be upfront. Careers in private equity are scarce and competitive. That’s why you need to position yourself in a manner that can groom you in front of hiring managers.

If you’re just getting started, normally, private equity analyst or associate jobs are entry-level jobs in private equity. 

To qualify, here are some of the requirements needed:

  • A bachelor’s or master’s degree in finance, economics, investment analysis, or accounting.
  • A Master of Business Administration (MBA) degree specializing in finance and Chartered Financial Analyst (CFA).
  • At least two years of experience within the banking industry.
  • Successfully completed an internship or having previous experience in a related field.

On top of that, you can also enroll in short courses and programs such as Breaking Into Wall Street (BIWS) to gain a competitive advantage.

It turns out that hiring managers do not look at qualifications only during the interview process; they also look at your skills.

…and not just skills. They’ll assess whether you have the relevant skills needed in the industry. Let’s take a look.

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What Skills Does a Private Equity Analyst Require?

As I said earlier, skills move the needle. They can guarantee you a job at the leading private equity firms more than anything else. Here are some of them;

1. Understand the private equity industry well

This skill is underrated, yet it’s the most important. You need to demonstrate that you have a comprehensive understanding of the industry basics, structures, models, and other factors. You should then be able to use this understanding when executing responsibilities tied to trends and industry changes.

2. Analytical skills

At the beginning of this article, I mentioned that a private equity analyst is responsible for analyzing financial statements, investment opportunities, scenarios, and models. You need analysis skills to be able to execute your duties (more about this in the job description section below).

3. Valuation skills

Valuation is the core business of private equity firms. When hired, you’re expected to apply your valuation skills to help the firm’s private equity and trading groups.

4. Networking skills

As an analyst, your job is to create good relations and an environment in which the firm can do business. You can do this by making contacts, solving conflicts, exhibiting exemplary leadership, and being good at communication.

Here are some of the other top-mentioned career skills that you need:

  • Detail Oriented
  • Economics
  • Due Diligence
  • Innovation
  • Collaboration
  • Portfolio Management
  • Problem-Solving Skills
  • Consulting Experience
  • Entrepreneurship
  • Critical Thinking

Additionally, if you’re a self-motivated professional who is practical, high on ethics, and result-oriented, it will serve as an added advantage on your CV or resume.

So brace yourself for those skills.

Let’s turn the pages and look at the duties and responsibilities of a private equity financial analyst.

Private equity skills

The Private Equity Analyst Job Description

If you want to become a successful private equity analyst, there are two core things that you need to understand. You need to become an ardent problem solver and be competitive above the industry averages.

To help you picture that, let’s take a look at some of the responsibilities that await you, should you become a private equity analyst:

  • Provide analytical and asset valuation support for the company’s private equity and trading groups.
  • Provide input for strategic development and acquisition opportunities within the specific industry.
  • Develop and implement specific hedging strategies to maximize profits and minimize price volatility.
  • Prepare reviews based on the financial statements of the company under consideration.
  • Ensure compliance with the company’s financial, risk, and strategic objectives.
  • Review and process potential new private equity investment opportunities.
  • Conduct in-depth research, monitor portfolios, report development, and monitor business growth.
  • Prepare financial variables and simulate financial scenarios.
  • Assess the stock value and ensure fulfillment of expected profit margins.
  • Conduct research and gather relevant data on the industry and competitors.
  • Creating corporate presentations.
  • Write investment committee memorandums.

To summarize, a private equity analyst is responsible for:

  • Fundraising
  • Screening for potential investment opportunities
  • Strategy based decision making

Want to know what a day looks like for a private equity analyst? Let’s have a look at the next section.

What Would Be the Typical Working Day of a Private Equity Analyst?

In most cases, private equity analysts begin their day at 9 a.m. and work until 7 p.m. or 9 p.m., which translates to an average of somewhere between 60-100 hours a week. 

While it’s difficult to predict the exact day, here are some of the duties you’re supposed to undertake:

  • Report to work, either online or in a physical office
  • Check emails and make phone calls to clients and prospects
  • Conduct research and analysis based on a given investment
  • Do asset valuations
  • Consult with colleagues about an opportunity or deal
  • Prepare reports and submit them to your supervisor

In a nutshell, we don’t have strange tasks that one has to undertake; every task is based on your job description.

However, one thing that you need to understand is that your performance at work will determine your compensation. 

So it’s important for you to work hard, and sometimes, if the situation demands, you can work on weekends to complete the tasks as required.

A day in the life of a PE Analyst

Having said that, let’s look at salaries and compensation prospects for a private equity analyst in the next section.

What Are the Private Equity Analyst Salary Prospects?

Working in a private equity firm is quite rewarding, however, for the most hardworking employee.

However, your skillset, experience, and education level play a great role in determining your salary.

  1. Salary and bonuses: To start with, your salary includes a basic salary and bonuses. While the salary may be static (subject to pay rise), bonuses may vary depending on your performance.
  2. Incremental margin: If you have an MBA or an advanced degree or qualification, in most cases, you may find that the basic salary has an incremental margin of 5%.
  3. Industry salary and compensation: The industry averages could be somewhere between $100,000 and $150,000 monthly for basic salary and compensation.
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One key goal that many private equity analysts tend to have is the ambition to grow their careers and climb up the ladder. Are you one of them? Read the next section to discover how.

What Are the Private Equity Analyst Career Advancement Prospects?

Just like every career, private equity analysts go through a career path. Sometimes, you can start in entry-level research associate positions after completing bachelor’s degree programs and end up in senior positions. In most cases, this happens when you’ve gathered sufficient experience or furthered your education.

If you want to know, I’ve put together a comprehensive article for you. Private Equity Career Path: A Detailed Guide.

What Does a Private Equity Analyst Do? Frequently Asked Questions

1. What skills do you need to be a private equity analyst?

As a private equity analyst, you first need strong financial analysis and modeling skills and knowledge of the investment process. On top of that, you need experience in due diligence, and the ability to communicate effectively with team members and clients.

2. How much do private equity analysts work?

As a private equity analyst, on average, you can work for about 60 to 100 hours a week.  Primarily, your work will focus on helping their firms make informed investment decisions based on financial models and market performance.

3. How does a private equity analyst differ from other types of financial analysts?

As a private equity analyst, your focus is on investments in private companies, performing due diligence, financial modeling, and portfolio management. On the other hand, other financial analysts may cover public companies and focus on equity research, corporate finance, or risk management.

4. How do private equity analysts identify and evaluate investment opportunities?

Your work as a private equity analyst is to identify and evaluate investment opportunities by analyzing financial statements. You also conduct due diligence by assessing market trends and identifying potential risks and opportunities for value creation.

5. What are the biggest challenges faced by private equity analysts?

The main challenges you can face as a private equity analyst include deal sourcing, due diligence, valuation, deal negotiation, and post-investment management of portfolio companies.

6. What is the impact of technology on the work of private equity analysts?

As a private equity analyst, technology can positively improve the efficiency of tasks such as data analysis, due diligence, and deal sourcing. On the other hand, it can also increase competition and the need for specialized skills.

7. How do private equity analysts stay up-to-date on industry trends and developments?

As a private equity analyst, you stay up-to-date on industry trends and developments by conducting market research, networking, and following trusted industry news sources. In some other cases, trends evolve right when you’re executing your duties.

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Wrapping Up: What’s Next for You?

In conclusion, becoming a private equity analyst is a highly competitive and challenging career path that requires a combination of academic qualifications and practical skills. 

If you’re serious about venturing into this career, you need to demonstrate commitment to the industry and the ability to execute the job responsibilities you will be assigned.

For instance, once hired, the responsibilities of a private equity analyst include providing analytical and asset valuation support, providing input for strategic development, and conducting in-depth research.

This is a rewarding career; brace up and go for it.

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