Private equity (PE) is often described as an exclusive club that accepts only former investment bankers, strategy consultants, and top b-school graduates as members. That’s not the case always. PE also offers grads and undergrads, engineers and accountants serious consideration and engaging and gainful careers.
Here we map the routes to PE careers and career paths.
Going straight from school to PE remains a pipedream for most. Strong candidates are those who gain experience in financial modeling at elite investment banks, become top financial analysts at their banks, and then plan their move to PE in two years, says efinancialcareers.com. But if you are a top student and also lucky, a PE fund may discover you, and you may be able to leapfrog over banking straight into a PE.
PE funds don’t want to hire undergraduates and train them. They prefer someone who has completed two or three years in a bulge-bracket bank or Bain or McKinsey and has the necessary basic skills.
MBA grads stand a good chance, particularly, but need experience in finance. Most PE companies like to hire people below 30, so the timeline should be planned well. For senior positions, most firms see an MBA as a prerequisite.
Firms that don’t consider an MBA a prerequisite still find it useful in a candidate. The percentages of MBAs at top PE firms as per a survey quoted by askivy.com are KKR – 61 percent; Blackstone – 63 percent; Candover – 59 percent; and Permira – 58 percent.
The (difficult) path from undergraduate straight to PE is through determined networking and cold-calling, to bag an interview, and through an academic initiative, to learn financial modeling by yourself. Undergrads hired by big firms have typically done internships at PE firms or in IB, strategy consulting, or restructuring.
If you manage to get an interview, you would need to show a passion for investing. Young PE hopefuls may receive more consideration at smaller firms than big ones. If you know alumni from your school, you may find success at least in the initial phase of recruitment.
An adequate grounding in PE, finance, and investing is required, so make an effort to improve your technical qualifications. Join a training program run by an institute or an online platform. Buy study material or a video course. If you learn financial modeling through a tutor-driven or online course, you will one up on your rival undergrad candidates.
Even if you have done some extended preparation for a year, you may still not make it. But continue your groundwork and networking, and keep your motivation high.
The advantage of moving from undergrad straight to PE is that you don’t have to face the long and hard hours and instability that a banking analyst faces, though a PE job is hardly a vacation activity. The work offers more variety, especially at smaller firms. As there are fewer people, you have to do everything from financial modelling to legal issues to deal brokering. But this also means that smaller firms look for experienced recruits in the just-below-30 category.
Undergrads who get into PE directly, bypassing banks, don’t benefit from the rigorous training that their banker colleagues receive in 100-hour weeks. They also won’t have the names of big banks on their resume that come in handy if they plan to switch tracks later. However, they may win credit for not taking the tried-and-tested route to PE through banking.
It is not impossible to get into PE from an engineering background, according to a Quoran. One path is through investment banking or consulting, which allows for a lateral move into PE. Banks like engineering graduates for their ability to work hard.
To make the transition possible, early- or mid-career engineers may require to join a top school for an MBA or Master’s in Finance degree and take up intensive networking. Browsing through Dealbook and Financial Times is essential, so is mastering financial modeling (3-statements and LBO).
A former consultant who majored in finance and worked for a top consulting firm found that a move into PE from consulting was a challenging mission. But he leveraged networking to join a middle-market PE firm. He focused on sub-industries to narrow down his target group of recruiters and met them in person.
When interviewers quizzed him about financial modeling, he mentioned his M&A experience, and when asked about leadership, he narrated his experiences during an expansion project at his consulting firm. Getting into PE from consulting depends not only on technical skills but also about your views on investment opportunities.
Private equity firms may hire high-quality accountants from the Big 4 who have worked on PE deals. PE firms work closely with audit companies and may poach their accountants who have experience in private equity.
The typical tasks at a PE firm are spreadsheet analysis of a target business for an LBO; identification of new deals for LBO; collection of data on a target company in which there is already an investment; coordination of diligence and research for a transaction; and efficient communication, explains careers-in-finance.com.
Pre-MBA candidates are usually hired as analysts or pre-MBA associates. Candidates, more often than not, have worked in investment banks, strategy consulting firms, or accounting firms for three or four years. Their main tasks would be prospecting (cold-calling, cold-emailing, etc.) and investment analysis. After a couple of years, they may be promoted to senior associate level. Some leave to pursue MBA or shift to another PE firm, hedge fund, or corporate development. Total average annual remuneration for analyst would be $110,600 and associate $174,800 in the US, according to Preqin/efinancialcareers.com.
Post-MBA candidates are hired as senior associates straight from b-school or two or three years after graduation. They have around six years’ experience in investment banking, PE, or consulting. They are usually in charge of deal-screening, financial modeling, and managing advisors such as investment banks, lawyers, and accountants. Remuneration: $264,500.
Director/principal/VP is a position that MBAs reach after two or three years at a PE firm. They execute transactions, source their own investments, and generate investment ideas. If they bring revenue for the company, they are made partner. Remuneration: $687,700.
The next level is managing director or partner, who leads a PE firm’s strategy, manages relationships with investors, and raises funds. Partners may invest a substantial share of their personal wealth in their own fund/firm. Compensation largely depends on the firm’s investment profits, explains askivy.net. Remuneration: $1,873,000.
The total annual average remuneration at the senior-most level for chief executive officers of PE firms is $3,312,000 in the US.
Obviously, in PE, your investor clients won’t be the only ones counting the money.
– How to get into asset management
– A guide to private equity careers
– How to get Hedge Fund jobs after MBA
– How to get a job on Wall Street
– Best MBA programs for private equity and venture capital
References: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13