A Career in Private Equity: An Overview

by Clayton Clive Blogger

Private Equity (PE) is an investment business. The firms collect high-net-worth funds and search businesses to invest across all the sectors (both start-ups and well-established corporates). It provides businesses with the capital necessary to grow and handle changes like restructuring or even a buyout. In brief, it is a high-risk venture with heavy returns.

Private equity firms raise capital from outside vendors. They use the capital to buy companies, operate and improve them, and then sell them for profit.

Some of the leading PE firms include The Blackstone Group, The Carlyle Group, Kohlberg Kravis Roberts, etc.

There are three types of private equity such as venture capital, buyouts, and special situations.

Venture capital: It involves funding for small and new businesses.

Buyouts: It involves the acquisition of a large number of shares or control. It is nothing but new ownership.

Special situations: It involves investment in establishing industry trends or government regulations, where new value gets unlocked.

Get to know about the career in private equity firms.

A career in Private Equity Firms

Working in the Private equity industry is complex. Yet, the work is interesting and demanding. You will understand how businesses work at high levels by interacting with bankers, legal representatives, consultants, CEOs, and top management teams.

The PE career attracts people who are competitive, extremely attentive to details, and high achievers. The candidate must have an interest in deals, investing, operations, and long-term projects rather than following the market. The ability to think about investments rather than selling is important.

The candidate should be a graduate or post-graduate in Finance, Economics, Investment Analysis, or Accounting. A doctorate in Investment Analysis, Econometrics, Math or Financial Engineering is a plus for the managerial position and certifications like Chartered Private Equity Professional (CPEP^TM) or Certified Public Accountant is essential in most of the PE firms. A Pre-MBA associate is the most junior professional in PE firms. Associates will usually have two-three years (as an analyst) of experience in strategy consulting or investment banking.

An associate’s day to day responsibilities varies as per the firm and the stage of the deal process.

The associate handles the financial modeling and initial due diligence about opportunities to invest. It includes the screening of potential investors, analyzing companies for investment opportunities, sourcing deals, supporting transactions, managing portfolio companies using PE software, raising capital, determining investment uses, executing exit strategies, and predicting the return on investment (ROI).

One can climb up the career ladder from analyst to partner passing through the mid-career positions like Associate, Senior Associate, Vice President, Principal or Director, and Managing Director or Partner.

According to PayScale, a PE Associate earns an average salary of USD 90,863 per annum, has normal work hours of 8-10 hours per day and may enjoy a perfect work-life balance. A mid-career professional (5-9 years of experience) in Private equity industry earn an average compensation of USD 118,644 per annum.

Identify the ideal background, correct your weak points, and work your way to gain a career in PE firms.