How to Get into Private Equity

Careers in private equity are highly sought-after, which means it can be challenging to break into this area of finance.

However, if you are an ambitious graduate with excellent analytical skills, there are opportunities for you to work in this highly competitive sector. Here is a look at how you can forge a route into private equity.

What is private equity?

In basic terms, private equity focuses on investing in established private companies. Private equity companies make money by making investments in those private firms and then working to increase their value. They do this by investing capital, restructuring and creating new products. There are many similarities between private equity and venture capital, but there are some key differences as this guide from ClearLight highlights. If your company is under five years in operation, it will usually be a better target for venture capital. Also, the amount invested in specific deals is typically higher for private equity firms than venture capital companies. Additionally, private equity investments usually take three to five years to become profitable, while venture capital investments can take up to seven years or more.

Become an Investment Banker

Private equity companies rarely hire graduates straight out of university. You will, therefore, need to work your way up in the finance sector before you can get into private equity. The first step is to complete an MBA in a relevant subject. That allows you to learn necessary skills like debt financing and financial modelling. You will then be in an excellent position to find an entry-level job as an investment banker. Working in investment banking involves the process of creating capital, so you will learn the skills and knowledge that you can apply to private equity. You will need to acquire at least two years’ experience of working in investment banking before a firm will consider you as a candidate.

Become a Strategy Consultant

Investment banking is the more typical route, but you may also be able to get into the sector if you have experience in strategy consulting. Private equity positions require excellent management, networking and negotiation skills. You can often develop these skills by working in a strategic consultancy role within the financial industry. You will then gain transferrable skills that you can apply to private equity. Unlike investment bankers, consultants do not usually have as much exposure to financial modelling and other technical skills that are required to work for a private equity company. If you come from a consultancy background, it is essential to gain the additional skills that private equity firms need and demonstrate this when you apply for a job.

Become an Analyst

Another potential route into private equity is to become a private equity analyst. This role is sometimes available to graduates who demonstrate they have the skills and potential to work in this sector. As an analyst, you would analyse companies’ economics, investment areas and potential deals. You would also coordinate research and prepare documents for partners. Working as an analyst, you would usually focus on projects within a specific sector. That allows you to become an expert in your particular field. Once you have gained experience, you can then apply for positions that involve directly working in private equity investment.

Network

Whichever route you take to get into private equity, it is incredibly advantageous to make connections with professionals. Because the private equity sector is highly competitive, it is worth spending time networking with people who work in private equity or who have contacts with people in that industry. When it comes to applying for a job in private equity, you may be able to get your foot in the door if you have respected referrals.