Private equity is one of the most desirable fields in the finance industry. The private equity industry pays huge remuneration, including salaries, bonuses, and sometimes some of the company profits. Professionals are also drawn to this field due to their prestigious, challenging job roles. Private equity companies invest in large firms not yet listed on public markets. With intense competition in the private equity industry and fewer jobs, knowing how to get into private equity and make it a successful career is important!
What does working in the private equity industry mean?
Private equity is a big industry involving big global investment firms and smaller players. Private equity firms are also popular as general partners. They raise funds or equity from investors, called limited partners. LPs can be big pension funds, high net-worth individuals, rich heritage families, etc. The private equity firms put their money in private companies, helping them to operate and grow.
After acquiring an unlisted company, the private equity investors improve their functioning or sell it to another private equity firm. When the private equity investors exit, they return the investment to LPs and some of the earned returns. Private equity firms earn profit by maximizing the leverage on a deal, called leveraged buy-outs. In LBO deals, PE companies invest in stable organizations with some equity and money borrowed from other sources like banks.
How to Get Into Private Equity?
Here is how you can get into a PE firm and kickstart your private equity career:
Make Investment Banking Your Launchpad
The road to private equity firms is often through investment banks. The banking juniors usually have completed their two-year training program and understand the fundamentals of finance, like financial modeling, pricing, mergers, acquisitions, etc. It is advisable to land your first job in an investment bank. This is undeniably the most successful way to start your private equity career. The graduates who wish to begin a career in PE must get work experience in the investment bank first. You can work in the M&A or leveraged finance departments to enhance your chances of being shortlisted for a private equity job.
The analysts and associates are at the bottom of the investment bank designations hierarchy. They see cashflows, conduct careful analysis, build financial models, etc., which helps you take senior roles in private equity.
Get Work Experience in Financial Firms
Another way to break into the private equity industry is by working in financial services with an accountancy firm, consultancy firm, or another financial institution. Working in private equity is evaluating whether a business investment will be lucrative. It would help if you also beat the competition to get the asset at your favorable terms. All this requires you to have experience in a financial company that trains you in negotiation and analytical skills, updates your industry and subject knowledge, etc. Having experience with these functionalities will help you start your career in private equity.
Complete Your Academics and Internship
To get into private equity, a strong educational background is vital. Many private equity firms also hire and train graduates from finance backgrounds. While completing your academics, apply for several internships that relate to private equity. If you cannot get an internship in a PE firm, try attending an internship in venture capital or investment banking firms. Some big companies run their training programs and offer jobs to their candidates.
Meet Headhunters
Most private equity firms outsource the candidate hiring to third-party recruiting firms. They screen resumes, conduct interviews, do background checks, etc. This requires you to be well acquainted with the headhunting firm. Be in touch with a few headhunting firms and maintain relationships with them.
Hone Skills
Private equity firms recruit candidates with basic finance knowledge, know how to read balance sheets, and understand the company valuation methods. Strong analytics is an essential ability to work in PE firms. Some top private equity firms look for all-rounder candidates with deep technical knowledge, critical thinking skills, and the ability to build relationships.
Private equity professionals must have excellent communication skills, be confident, and be persuasive. They should be good with numbers, know how businesses work, and carry an opinion on a particular deal.
Wrapping up
In PE firms, the professionals do the deals and invest in the companies rather than just advising. The private equity industry also offers job stability and a handsome paycheck. Getting into this lucrative private equity career path requires a strong educational background in finance or a related field. Gain relevant experience in investment banking, venture capital, or other financial services. Establish your proficiency in financial modeling, investment analysis, etc.
