Breaking into a career in private equity is more complex than it seems. Many people believe that a background in finance is enough to pursue a career within the private equity industry. To succeed in the private equity industry, you need to have a lot more than a financial background. Be aware that private equity is always on the lookout for high-quality talent.
You can have a rewarding and lucrative career in private equity if you know how to enter the industry. Knowing how to get into private equity will increase your chances of success, regardless of your position. Entering private equity is a big career step, but you need ambition and a strong work ethic. This article will explain private equity and how to get started in this industry.
What is Private Equity?
Private equity (PE), or private investment, is the ownership or interest in a business that’s not publicly traded. High-net-worth individuals (HNWI) are highly sought after for their investment capital and purchasing potential. Private equity firms are interested in these individuals and other entities that invest in private companies or acquire public companies.
Private equity firms can be pension funds funded and backed by institutional investors or well-established private investment organizations.
How to Invest in Private Equity
For private equity, you must have various degrees and take business school courses during your career. Both hard and soft skills will be required. Private equity firms of repute prefer that you have work experience, while smaller firms may accept internships.
You can also consider other strategies to help you get started beyond obtaining the private equity certification.
Education and Courses
A private equity analyst must have a bachelor’s degree in finance or accounting, plus work experience. Rarely is an analyst hired straight out of undergrad, but it can happen if you have top credentials from a respected institution.
Most prestigious PE firms also prefer that you have a degree from a top-tier business school, mainly if your goal is to move beyond analyst. You must first meet the education requirements and obtain private equity certifications to enter the private equity industry.
Enter into a Private Equity Career after College
Even though most private equity firms will not hire graduates and instead prefer someone with some investment banking experience, it is still possible to find a role in private equity as an undergraduate. An internship is an excellent way to get a job with a large organization. However, not all private equity companies offer open internships. Finance degrees are usually highly valued.
If you cannot get an internship or a job in private equity, either during college or immediately after, consider a complementary field, such as investment banking, venture capitalism, or asset management. Even though internships are limited in these fields, particularly at the top companies, it is easier to get one than to go straight into private equity. You can apply for private equity jobs after a few more years of experience since you won’t need basic training anymore.
Work Experience and Internships
Private equity internships are possible. A PE firm’s training can last from three to six months. You will have tasks similar to an analyst’s, which will help you develop your private equity skills. Monitoring portfolio companies or cold-calling potential deals. You will also be responsible for reviewing data to sell companies.
It is not easy to find internships for undergraduates, and they rarely lead to full-time positions in the company. It is a step up into working in a private equity company following a few years of experience in investment banking. You will get the attention you need from a PE firm if you have experience working as an analyst in elite boutique or bulge bracket banks. Smaller firms may consider your experience as an investment banking analyst from boutique and middle-market banks.
Get a Master’s Degree
Private equity professionals often have MBAs or master’s degrees from top universities. This can help them later when they have gained experience in related fields. It is possible to enter private equity by gaining enough experience and earning your master’s. However, this requires planning, as many top firms hire young employees to give them time to develop and reach their full potential.
Finding open positions is the most challenging part of getting a job in private equity after earning a Master’s degree. Doing a lot of cold-calling, networking, and self-education on issues you did not cover in college is necessary. Since big firms prefer candidates who have internships in private equity, consulting, or investment banking firms, focusing on small firms and jobs within these complementary fields can be a great way to get a position at a top-tier private equity organization.
Skills
Individuals seeking to join a private equity company must possess hard and soft skills. Soft skills, such as software, analytics, and statistics, are essential to a career in private equity. Soft skills like teamwork and understanding the firm’s culture are crucial to a PE company’s success. Strong communication skills, particularly for senior roles, are essential.
For those who want to break into the private equity industry, technical skills like financial modeling, M&A modeling, LBO modeling, and financial analysis will be essential. Other necessary skills for those pursuing a career in the private equity industry include management skills, networking, and negotiating.
Private Equity Career Path
Many aspiring professionals are interested in aiming for a private equity career. Many key positions are available in a PE firm. The career path in private equity and hierarchy varies from one firm to the other. One can earn well if they are in any of the following positions.
Average salary per annum – USD 700K to USD 2M
Private Equity Analyst
The entry-level job is mainly related to logistical deals.
Average salary per annum – USD 100 to USD 150K
Time for promotion to next level – 2-3 years
Associate
In this position, deals and analytics are the main focus
Average salary per annum – USD 150 to USD 300K
Time for promotion to next level – 2-3 years
Senior Associate
Sourcing deals, managing transactions, and monitoring organizations in the firm’s portfolio
Average salary per annum – USD 250 to USD 400K
Time for promotion to next level – 2-3 years
Vice President
Manager of almost all the deals
Average salary per annum – USD 350 to USD 500K
Time for promotion to next level – 3-4 years
Principal or Director
Negotiator and also a top generator of deals
Average salary per annum – USD 500 to USD 800K
Time for promotion to next level – 3-4 years
Managing Director or Partner
Fundraiser and Chief Representative
Conclusion
To break into the private equity industry, you need a solid background. If you are a networker with a strong desire to succeed, you’ll be halfway there immediately. It is vital to get started immediately.