Private equity is arguably one of the most sought-after careers in the finance sector, even above investment banking. It has a lot to offer ambitious and analytical graduates - read on to see where you fit in.
Join the cutting edge of the finance world
What is private equity?
Private equity (PE) focuses on companies that are not publicly traded on a stock exchange. PE firms make money by buying up or investing in private companies and working to increase their value. They provide capital to help companies grow, develop new products or restructure. They might plan to sell the company or want to own it long term.
The sale of the sandwich chain Pret a Manger back in 2008 is a good example of a successful investment by a PE firm. Bridgepoint fought off competition to gain a controlling stake in Pret. Pret had a turnover of £150 million and the buyout valued it at £345 million. Bridgepoint clearly saw the potential value in Pret's financial future – Pret’s sales in 2015 were nearly £675 million.
The role of an analyst
Like investment banking, the entry level role for bright graduates in private equity is that of an analyst.
As a graduate analyst in private equity, your role will be to analyse the economics of companies and potential deals. You might:
- research new deals and investment areas
- prepare relevant documentation for partners
- coordinate the research and due diligence needed for a deal to take place
You'll probably focus on projects in a particular sector area or industry and become an expert in that field.
Getting into private equity
Private equity firms almost never recruit out of university. They may recruit MBAs from business schools – and even those usually have a couple of years of investment banking experience.
Most private equity firms use headhunters to recruit from investment banks. Your best path to a role in PE is to apply to an investment bank and excel in your first few years as an analyst. If you put a lot of effort into networking you might find yourself on a headhunter’s list.
The few firms who do recruit out of university typically have some sort of Summer Analyst Programme where you work full time over the summer holidays as an undergraduate. Competition for places on these programmes is very, very intense so plenty of preparation is needed.
Another route into PE is through management or strategy consultancy. At a consulting firm you can gain exposure to all aspects of business and finance. The analytical and commercial skills you gain there can provide a sound springboard for entry into a full-time private equity role.
Tips for getting ahead
Network where you can. Make use of your university's alumni networks to see if anyone has gone onto a career in private equity. Send out a polite email asking if you can meet them for a coffee. If you manage to secure a meeting, come armed with questions and always offer to pay for the coffee – they're giving up their time, after all.
Top skills to excel
Analytical skills and attention to detail
Your work needs to stand up to scrutiny by the major players in a deal.
The hours can be very long, especially as a potential deal gains momentum and moves towards closure. You'll need to be flexible and ready to commit to what your firm needs.
Relationship-building and communication skills
This is critical both at the start of your PE career and as you progress. You'll need to influence others, win new business and lead a team and business.
Salaries and bonuses
Private equity salaries are some of the most potentially lucrative around. After a couple of years you could be making around £70,000 as a base salary and the same again in bonuses. After ten years you could be taking home around £500,000 in total.
It's tough cracking into the private equity sector. As we've mentioned, roles in this industry are highly sought-after and you'll need to prove to a firm that you have both the hard and soft skills to add value to their business.