Breaking into private equity careers is not as simple as most people expect. Many believe a financial background is all they need for a career in the private equity industry. However, a whole lot more is required to succeed in this field. When looking at how to get into private equity, be aware that the industry is always looking for top-quality talent.
This type of talent includes performers working in one of the top 500 largest firms of the United States otherwise known as the Fortune 500 companies. Main contenders for the private equity market are often also key players in high-end management consulting or law firms.
Let’s talk about how you can get onto the career path in the industry. What are the roles involved, what kind of education do you need and is work experience a pre-requirement? You also need to ask what do private equity firms look for in a person seeking a position with the organization if you want to succeed in the industry.
Our full guide will give you all the information you need to get into the private equity industry.
What is Private Equity?
Private equity (PE) involves having an interest or ownership in a company that is not publicly traded. High-net-worth-individuals (HNWI) are highly sought after for their investment capital and purchasing potential. Private equity companies seek out these individuals and other entities who invest in shares of private companies or take over public companies.
The types of private equity firms include pension funds funded by institutional investors and well-established private equity organizations backed by accredited investors. Huge capital outlay is required to get into private equity. We’re talking a minimum of $250,000 entry level for some funds!
Private Equity Career Path
The private equity career path can be extremely rewarding if you can get a foot in the door and be successful in the role. It’s one of the most highly-regarded and coveted careers in the world of finance. However, it’s also one of the most competitive careers in the industry.
Most associates in the larger and most sought-after PE firms have an extensive background in investment banking as analysts. An associate is a junior-level hire in these bigger firms. A private equity career as an associate in smaller PE firms is possible if you’ve experience in boutique banks, the corporate development profession or even worked in the Big Four.
While the private equity career path differs depending on the firm you’re entering, it normally takes the following direction:
- Senior associate
- Director or principal
- Managing director or partner
The private equity job descriptions have also been included to highlight the different roles.
What does a private equity analyst do?
A private equity analyst can sometimes be hired as an intern straight from undergraduate studies, but that’s reserved only for the most promising of candidates. Many private equity firms require some work experience as an investment banking analyst. The role involves assisting associates in tasks such as sourcing deals, exploring potential investments, fundraising, and checking the progress of portfolio companies.
The private equity analyst job description includes going through data, performing research, and setting up conference calls. Ultimately, a PE analyst performs the same tasks as the associate but without being responsible for making the final call. By supporting the associate, the analyst is also earning valuable on-the-job training.
What does a private equity associate do?
The private equity associate is responsible for independently leading deal processes from start to end. They work on generating new ideas, sourcing deals, managing portfolio companies, and fundraising. An associate is a step-up from the role of the analyst but with more responsibility and independence.
A typical day could include working on financial models for a deal, hosting a conference call with private company owners as part of a buy-in strategy, and reviewing data of a portfolio company. A typical private equity associate salary plus bonus could be anything between $100,000 to $150,000 annually.
What does a private equity senior associate do?
The title of senior associate is normally given to experienced associates who have been with the firm for some years. An associate who goes to study further at business school and returns to the firm may also be called a senior associate. This role essentially involves the same tasks as before but with more managerial responsibilities.
The private equity senior associate salary plus bonus ranges from $250,000 to $400,000 per year.
What does a private equity vice-president do?
The role of the vice-president in a private equity firm entails managing the deals. They are fully trusted by the Managing Director and other principle team members to handle the deals efficiently. The vice-president gets to talk to the clients one-on-one, lead all negotiations, scrutinise all transactions while mentoring the team.
You need to be able to communicate well, handle negotiations smoothly, and present smartly. Without excellent communication skills, a vice-president isn’t likely to last long in this position. The average private equity salary for a vice-president is $350,000 to $500,000 per year.
What does a private equity director or principal do?
When you reach the position of director or principal, you can expect to be involved in critical negotiations, sourcing deals, and fundraising. This role often entails convincing owners of private companies to sell to your firm. The principal is often the person who talks on behalf of the deals team to the managing director of the PE firm.
When you become a principal, you can expect this role to be grooming you towards becoming a partner in the private equity firm you’re working for. A private equity principal salary plus bonus can be in the region of $500,000 to $800,000 per year.
What does a private equity managing director or partner do?
Everyone wants to know how to get into private equity and make partner. It’s a long and arduous journey, but it’s well worth it. Being the managing director or partner of a private equity firm means you’re at the top! You’re the big name at the top that’s responsible for boosting the firm’s name at every opportunity while maintaining the reputation of the company. You still get involved in deals, fundraising, and attending conferences.
But, you rely on your principal to carry the bulk of the work while you focus on building relationships. A private equity partner salary plus bonus can be anything from $700,00 to $2 million a year. However, managing directors and partners are also required to invest their own personal wealth at this stage.
How to Get Into Private Equity
Various educational degrees are required for getting into private equity as well as taking courses at business schools throughout your career. A range of both hard and soft skills are necessary. Many of the larger, prestigious private equity firms prefer you to have some work experience in the industry while smaller PE firms may consider internships.
There are also a number of strategies you can consider to get you started beyond getting the necessary private equity certification.
Education and courses
Private equity analysts need to have an undergraduate degree in accounting or finances plus work experience. It rarely happens that an analyst is taken straight from undergrad but it’s possible if you have top credentials from a respected university.
Having an MBA from a top business school is also preferred by most prestigious PE firms, especially if you want to advance beyond being an analyst. Ensuring you follow the right private equity education requirements is the first step to getting into the industry further down the line.
Type of skills required
Both hard and soft skills are required for individuals seeking to enter a private equity firm. While “hard” skills such as analytics, statistics, software use are necessary, soft skills are also essential for careers in private equity.
Positions in private equity firms such as The Blackstone Group Inc. and KKR & Co. Inc. are always eyed by top talents in the industry. But, what are the typical characteristic traits of these top performers in the industry? In a nutshell, they’re normally:
- Top-class achievers who work endlessly to reach their ultimate goals
- Pay close attention to every detail no matter how small
- Go all out to attract the best deals and win them
- See the roles of company fundraising and monitoring as being essential to their success
- Critical thinkers with a deep understanding of private equity basics
- Passionate about investment and operations of companies
- Always keen to get involved in building up portfolio companies that may take years of diligent attention
Soft skills such as being able to work and collaborate on a team efficiently while understanding the core culture of the company are essential to being successful in a PE firm. Strong communication skills are critical, especially for senior roles.
Technical skills such as financial modeling, M&A modeling, LBO modeling, and financial analysis are key for breaking into private equity firms. Management skills, networking skills, and negotiating skills are other critical components required for those pursuing a career in private equity.
Internships and work experience
A private equity internship is possible. An internship could last between three to six months for a PE firm. Your tasks will be similar to that of an analyst and will help you in building your private equity skills. However, you’ll normally end up doing tasks such as monitoring portfolio companies and cold calling for potential deals. You’ll also be involved in reviewing data for selling companies.
Internships for undergraduates are not easy to come by and they often don’t lead to a full-time position in the firm. However, it should be viewed as a stepping stone into working for a private equity firm after completing a few years in the investment banking sector.
Work experience as an investment banking analyst in either bulge bracket or elite boutique banks will give you the backing you need to be noticed by a PE firm. Smaller firms will consider your investment banking analyst experience from other boutique and middle market banks.
Strategies to Get You Started
There are a few strategies to consider to get you started on your career as a private equity professional.
Apply for private equity mega-funds structured internships
If you’re wondering how to get into private equity quickly, this is the way to go. However, it’s also very challenging. Private equity mega-funds structured internships often include full-time return offers which makes them highly attractive but extremely competitive as well. Your application for such an internship will only work if you have high grades from a top university as well as other internships under your belt.
Research and cold email private equity firms
Many firms don’t advertise private equity positions, relying instead on head hunters to find the best talent on the market. But, you can always do research and aggressively apply for positions by cold emailing. Sometimes, a smaller PE firm may be willing to offer an informal internship in response to your application.
Build up your work experience
Spend two to three years building up your work experience after graduating in investment banking. Consider working for a corporate development firm or get involved in Big Four transactions, real estate lending or commercial brokerage.
Private Equity Recruitment
The most common route PE firms take to hire people is through headhunters. There are two main reasons for taking this approach to private equity recruiting:
- PE firms are rich enough to outsource recruitment.
- Few full-time positions become available on a regular basis, with firms hiring only 1–8 private equity associates every year.
To establish your name in the industry, it’s a good idea to identify these private equity recruiters and start building relationships with them. Your best approach would be to cold call or cold email reputable headhunters in the PE recruitment industry. You may also be approached by headhunters if your reputation as an analyst in a large investment banking firm is excellent.
Since private equity headhunters are constantly studying desirable PE hires, you have a chance of getting into the PE career sector if you have the right credentials.
Your first “interview” will most often be a screening done by the headhunter of a PE firm. This initial screen entails checking you have the right qualifications, work experience, and necessary skills. They’ll study your deals history, clients, and projects portfolio.
Key traits such as drive and determination, excellent communication skills, and intelligence will impress a PE headhunter who’s not only looking for technical skills. They want to know you can establish a rapport with them before putting your forward for private equity roles in a firm.
On-site interviews follow different processes depending on what the private equity firm is looking for. You can expect both technical and personal fit questions. And, a range of modeling tests. PE firms will want to gauge your knowledge, personable skills, and work experience before giving you a job offer.
Why Work in Private Equity?
If you’re highly motivated, driven to make and close deals, stimulated by anything to do with investments and operations, then working in private equity is a good fit. There are pros to working in this sector compared to investment banking. But, there are also disadvantages.
The private equity salary ranks far higher than those offered in investment banking. Higher bonuses on all levels is another plus. Other pros include more interesting work and more exposure to a wider range of companies. Even on a junior level, you’re handed more responsibilities. Most PE firms are small which means your performance counts which means a higher likelihood of a promotion.
However, you need to consider the disadvantages too if you’re serious about venturing into the private equity sector. Breaking into the private equity hierarchy is not easy even if you do start as an analyst. PE firms are generally smaller than most investment banks which means promotions are harder to come by.
You’ll work long hours and can expect to travel extensively. Your network could be limited and you could spend a lot of time cold calling, reviewing data, and monitoring portfolio companies. Actually closing a deal is a rare event even if it’s part of the private equity associate job description!
- Careers in the private equity industry are in high demand and competitive
- The exact career path in any firm depends on its hierarchy
- Getting a job in private equity firms requires having the right education AND work experience as an investment banking analyst.
- Headhunters are assigned the job of finding the best candidates for elite private equity firms
- It takes a highly-dedicated achiever with a range of both hard and soft skills to succeed in the private equity career
- The industry is known for high private equity salaries compared to other finance sectors
Private equity interviews involve being asked a range of questions. In order to be well-prepared, make sure you:
- Have a full understanding of what is private equity and the background of the firm you’re applying to. How does the firm fit into the private equity industry?
- Know your own strengths and competencies. How knowledgeable are you about the private equity market? Which companies would you consider investing in and which ones are not good investment opportunities?
- Can deal with questions about technical skills such as LBO and finance modeling, accounting, valuation, and more. You’ll be required to showcase your critical thinking abilities.
- Understand how to perform a deal with a client. What did you do and what value do you add to the process?
- Can perform a modeling test. Knowing how to build models will impress the team interviewing you.
Entering into private equity firms from consulting is possible. If you’ve experience in a MBB consulting firm, a PE firm may consider you for a position. Or, focus on positions in smaller PE firms who are known for hiring consultants from companies such as Golden Gate or Charlesbank.
The other opportunity open to getting into PE firms from consulting is the post-MBA private equity strategy. This entails going to business school and completing a MBA before approaching for a private equity role
You can get into private equity with no experience as long as you’re experienced in other finance sectors. Headhunters assigned to finding top talent for private equity firms will always look out for people who have a strong background in the investment banking industry for bulge bracket and elite boutique banks.
When looking at how to get into private equity with no experience, you could consider the smaller PE firms. These firms will consider experience gained in middle market banks.
Some private equity mega-funds offer structured internships with potential full-time return offers for undergrads straight from top educational institutions.
Private equity firms offer high salaries even at the most junior levels. Depending on the firm, a private equity analyst salary could start in the region of $100,000 to $150,000 going up to $2 million for a partner.