In the world of finance, jobs in private equity (PE) are the most sought after and are quite scarce, making it highly competitive.
PE firms pool funds from high net worth individuals (HNWI) or institutional inventors to invest in private companies or leveraged buyouts (LBOs). They acquire a majority stake or a controlling sizeable minority stake in the firm as a means to redirect the growth of the company to maximise returns on the PE firm’s investment. For each capital fund that the PE firm manages, it receives a share of yearly profits of around 20%.
The work involved in PE firms requires very technical skills: analysing financial statements, understanding contract law, conducting due diligence and an understanding of different sectors because PE funds invest across different industries. PE firms do not tend to provide structured training and expect those who join them to have some skills already. Therefore given the increased competition for jobs in PE, it is very difficult for a fresh graduate to break into the industry. For example, top firms often expect candidates for entry-level positions to have at least an MBA or investment banking/consulting experience.
Most PE firms recruit investment bankers after they have completed their 2 - 3-year programme because they have a clear understanding of M&A processes, debt financing, financial modelling and due diligence. The skills acquired during the programme are invaluable and very transferrable to PE funds, as previously mentioned.
Whilst investment banking is a more obvious route into PE, firms do look for candidates with industry and strategy consulting experience because of the similarly transferable skillset, especially from the top tier firms such as Bain, BCG and McKinsey. PE roles require strong negotiation, networking and management skills that are often developed within consulting. These are essential skills as PE firms speak to investment bankers and venture capital investors, they persuade business owners that the PE firm can enhance the shareholder value, negotiate labour union and cost-saving measures. Operational management is another skill sought after by PE firms as they are relevant for implementing operational restructuring measures and planning long-term growth strategies.
When applying to PE firms from a consulting background, it is important to consider what they are looking for. One of the differences between consultants and investment bankers is that consultants may not have had as much exposure to financial modelling and the technical skills required. Therefore, it is a good idea to display this ability and knowledge from the outset.
Finally, it is incredibly beneficial to network and makes use of your connections. Due to the highly competitive nature of the sector, it is worth taking the time now to meet people and talk to them about working in Private Equity. When it comes to applications, referrals may help to get your foot in the door.