Would you like to work in Private Equity? Do you know what is done in this job? In this article we want to show you and guide you what a job in Private Equity consists of.What does it take to learn to build a financial model/financial modeling.
What is private equity?
A Private Equity is a manager that manages the funds of its investors. Thus, they use investor funds to acquire companies and, after a period that is usually around 3-5 years, sell them. The capital gain obtained (if applicable) with the sale will be the return obtained from the Private Equity, which will be distributed proportionally among its investors.
Profitability in Private Equity transactions is achieved thanks to:
Sell the company at a higher price than it was bought: for this, during the years that Private Equity has the company in its portfolio, it is dedicated to making it more competitive, eliminating duplicate costs, expanding, acquiring competitors, etc. In short, Private Equity improves the company to be able to sell it at a higher price.
What are the main private equity?
Contrary to what happens with Consultants, Investment Banks or Auditors, there are many types of Private Equities. There are some specialized in certain sectors (infrastructures, Banks and insurance companies, consumption, etc.), others specialized in some specific type of debt, others that manage portfolios of unpaid loans from Banks, and thus a large number of possibilities.
The vast majority of them are headquartered in London or New York and some have small regional offices around the world.
How do you get a job in private equity?
Analyst or associate positions in Private Equity are highly valued for the following reasons:
There are many fewer places than in other sectors. Normally, Private Equities have very small staff structures, especially in their regional offices. The work is very interesting and rewarding.
Consequently, the best prepared candidates tend to profile their candidacy for the positions
The professional career is usually very fast.
Apart from all this, Private Equities usually require several years of previous experience to be able to aspire to a position. It is very rare for a Private Equity Analyst / Associate to come directly from the University or with just 1 year of work experience.
What profile is the sector looking for?
Generally, Private Equities look for candidates with previous experience between 3 and 5 years in Investment Banking or Strategic Consulting. They look for candidates who have had contact with the world of Private Equity from the advisory side, so that they know well the operations and dynamics of the market.
However, you can see cases of different profiles that end in a Private Equity. They are people who for different reasons have come to have an interview and have stood out above the rest for having some differential characteristic.
Private Equities (especially their regional offices) have very small staff structures. They typically have 1 or 2 analysts, 1 or 2 investment directors, and 1 or 2 partners. Contrary to what happens in the rest of the sectors that we are analyzing, in Private Equities the turnover is not so high and there is usually more vocation to belong and to pursue a career in the same place.
Thus, it is very common to find people who, after a few years in Investment Banking or Consulting, entered a Private Equity and developed their entire career there.