A guide to private equity careers - MBA Crystal Ball (2022)

“Private equity” comprises investors and funds that put in millions or billions of dollars for the acquisition of stake in companies that are in need of capital and restructuring, that are already bringing in revenue, and that can be made more profitable. These investments are not noted in a public exchange. Private Equity (PE) firms may buy a stake in a target company or go in for an outright buyout. If they buy a controlling share, they may bring in new management or ideas.

PE firms also engage in “leveraged buyouts” (LBO), where it borrows additional funds to improve their buying power, providing the target company as collateral. The leading private firms (KKR, TPG, Blackstone, etc.), along with companies that are involved in middle-market transactions (smaller deals), control one trillion dollars of capital. PEs exist as partnerships, with a general partners, who provide business expertise, and limited partners, who provide funds.

Private equity is a prosperous segment of the economy that offers among the most lucrative careers in finance. We find out the reasons why private equity makes a good career choice, besides other aspects of PE.

Why PE?

The work is interesting, though demanding, with long hours. As part of your activities, you will interact with not only bankers, consultants, and legal representatives, but also CEOs and top management teams though you may still be at a junior level. You will get to know how businesses work at high levels.

As with other finance career paths, the remuneration is excellent in PE. Apart from basic pay and bonus, PE professionals receive an incentive known as “carried interest,” which is a direct share in their company’s profits and a substantial part of their earnings. PE professionals in the US earn carried interest before they reach director level and after they reach that position in European and Asia-Pacific firms.

Where do Private Equity firms recruit? And whom?

Private Equity firms hire mainly analysts from:

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  • bulge-bracket investment banks
  • middle-market banks, and boutique banks
  • PE professionals from other firms
  • undergrads for junior roles in emerging markets

It is difficult to break into private equity if you are a recent graduate or postgraduate with little experience in the field. PE firms also hire from reputed management consultancies, and from elite, finance-focused b-schools (Harvard, Stanford, Wharton, and Booth in the US; LBS, Oxford, and Cambridge in the UK; and INSEAD, HEC, and ESSEC in France, for example). PE firms in the US see more value in hiring MBAs than firms in Europe.

Big PE firms such as Blackstone, Carlyle, and KKR hire investment bankers with two or three years’ experience because banking and PE require similar skills and bank candidates’ experience helps teach them the required skills more easily.

Bankers from second-year analysts to first-year associates are preferred for their expertise in financial modelling, transaction management skills, strategic thinking, industrious nature, and sector knowledge.

Elite PE firms prefer candidates from big investment banks, such as Goldman Sachs and Morgan Stanley. You also have a good chance if you are a junior strategy consultant at McKinsey, Bain, or BCG. Some firms such as Bain Capital prefer strategy consultants to bankers. Unconventional backgrounds such as equity research and corporate strategy may also work.

Corporate lawyers, science PhDs, IB associates with MBAs, and mid-career corporate finance professionals are seen as non-traditional candidates and may find entry into PE difficult unless they are outside the US/UK, in India, Russia, or Central and Eastern Europe; work in a closely related field on transactions (Big 4 valuation/advisory, consulting, direct lending, corporate development); or are aiming for smaller PE funds.

Key skills required for private equity jobs

A degree, even from a top school, carries only so much weight and is only a qualification that helps in the initial screening process. Nevertheless, your degree should show that you have analytical ability; usually, finance and science degrees are favored. A strong professional background in investment banking, strategy consulting, corporate development, or restructuring is what recruiters seek.

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Important skills for an associate include:

  • knowledge of specific industries
  • operating experience
  • ability to develop and analyze spreadsheets
  • financial modeling/analysis skills
  • insight into how businesses are doing
  • how management interventions could help businesses
  • ability to research markets, competition, customers, etc

If you speak a couple of European languages, it is a plus. It is useful to know German, French, Italian, Spanish, Dutch, or Nordic and Eastern European languages. People skills and a cool head to handle deal pressure are also among important requirements.

It would also help to show that you’re a well-rounded person. For example, if you have done well in athletics, you should talk about it. Also show your capacity for leadership and entrepreneurship. If you have been a club president or organized a charity, make a mention.

When do private equity companies recruit?

For traditional candidates for PE jobs (IB analysts, etc.), there is an on-cycle and an off-cycle recruitment process, explains mergerandinquisitions.com. The on-cycle process for analysts at big PE and boutique firms runs October-January/March in New York. If you are selected, you will only begin work in August of next year.

The off-cycle process is meant for roles outside New York; roles for anyone who is not working at an investment bank; and roles at smaller firms. Off-cycle takes more time than on-cycle, but you start work immediately. In London, firms start the process in January, not in October, and present “start immediately” and “interview in advance” options.

Tests in the on-cycle process are time-bound and quick. Unlike in on-cycle, tests in off-cycle require more thought and preparation of a real investment thesis. Outside the US and the UK, too, a more or less similar pattern of case studies/modeling tests and interview questions is followed. Headhunters call the shots in the on-cycle process.

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Undergrad and graduate students are often advised to start networking well before they start their job hunt.

PE tests, interviews

Case studies and modeling tests evaluate your ability to work under pressure. Tests may be very quick (30 minutes, creating a simple LBO model); intermediate tests (one to three hours, making a real LBO model); or take-home tests (a few days to a few weeks; writing a real investment thesis).

PE interview questions can also be categorized: Fit (questions relating to PE, the firm, your long-term goals); market/industry (about industries/companies that interest you); technical questions (similar to IB interview questions); and deal/client experiences (how you added value to a deal). Many candidates put too much focus on technical and modeling tests and too little on questions about fit, etc., which are equally important. Firms will test your business sense and “commerciality.”

At interviews, it would help if you could say you are interviewing at other firms, too. Headhunters become more interested in you the moment you say you’re also talking to others.

It pays to research the firm interviewing you. Analyze a couple of its investments and see what it did right (or wrong).

The typical candidate who passes interviews typically works for a big bank in a solid industry group, is from an elite university, and has a great GPA.

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Prepare for the CV interview round for questions such as the relevant numbers on transactions mentioned; a deal that would be most relevant to a PE interviewer; why you are interested in PE/interviewing firm; which companies that you’ve worked with would be good to invest in; mechanics of the LBO model; importance of EBITDA (earnings before interest, taxes, depreciation, and amortization) and FCF (free cash flow) for PE investors; your research methods; importance of management for PE; interesting deals in the news; where you see yourself in five years; and what motivates you.

There will also be a likeability test to see if your future colleagues would want to work with you. This may be at a dinner or drinks, but be aware that though the atmosphere may be informal, every answer of yours will be scrutinized.

The perfect CV

A perfect CV for recruiters’ eyes should consist of only one page. A narrative style should be discarded for bullet points, with four/five bullet points about your background that are relevant to PEs; academic qualifications; deals at your investment bank or Big 4 corporate finance; and personal interests. Be minimalistic: don’t sign and never send a photo.

Strategy review

If you fail to win an offer despite your best efforts, ask yourself whether you told your story well; whether you did well on the technical parts; and whether you have enough experience. Work to correct your weak points. Find out exactly what PE funds are looking for, the ideal background that would win offers, and what your new strategy should be.

Also read:
Best MBA programs for private equity
Private equity in India: What went wrong?
How to get into private equity
Private Equity vs Venture Capital vs Hedge Funds
Private Equity or Venture Capital jobs after MBA

References: 1, 2, 3, 4, 5, 6, 7, 8, 9

FAQs

Is an MBA worth it for private equity? ›

Getting an MBA can dramatically improve your chances of breaking into the fieldof private equity, especially at top firms that only recruit at top business schools. Many business schools provide an abundance of networking opportunities, which are critical to landing a job in private equity.

Which MBA is best for private equity? ›

Best MBA Programs

The best MBA program to get into private equity (and likely all of finance) is the Harvard Business School. 37% of all mid-level (and above) positions were occupied by graduates of HBS.

Do private equity firms pay for your MBA? ›

Though top management consulting firms often pay for MBA degrees while prestigious private equity firms usually do not, the salaries at elite private equity firms like The Carlyle Group and the Blackstone Group are usually so exceptional that their employees can afford the cost of an MBA degree, he says.

Do you need CFA to work in private equity? ›

You'll have an edge over other investment banking analysts

Besides just a bachelor's degree, a lot of professionals have a master's degree or an MBA. The CFA is not common among junior bankers and will help you stand out in the uber-competitive world of private equity.

How tough is it to get into private equity? ›

Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.

Is MBA needed for hedge fund? ›

MBAs might be prevalent in private equity, but hedge funds generally don't demand you go to business school - just 14% of hedge fund professionals possess an MBA.

What degree is best for private equity? ›

Candidates should have an bachelor's degree in an analytical major like finance, accounting, statistics, mathematics, or economics. Private equity fund management requires technical ability to analyze financial performance and estimate the value of a private company.

What banks does Blackstone recruit from? ›

  • Jefferies & Company (▲07) 99.6%
  • Lincoln International (= =) 99.2%
  • Bank of America Merrill Lynch (▲03) 98.9%
  • Evercore (▽01) 98.5%
  • Financial Technology Partners (+ +) 98.1%

Do I need an MBA for VC? ›

While an MBA degree can certainly hone a technical skill set necessary for a job in VC, there's a practice much more valuable for pursuing a career in the field.

How much do Stanford MBA graduates make? ›

Stanford GSB alumni are the world's highest-paid MBA graduates, with the class of 2021 recording an average graduate starting salary of $162k.
...
Stanford MBA class profile.
Students417
International Students %43
Female Students %47
Average GMAT734
Average Work Exp. (years)4.6
1 more row

How do I get my MBA sponsored? ›

Consider these steps when attempting to secure an MBA sponsorship offer with an employer:
  1. Secure a job with a company that has an MBA sponsorship program. ...
  2. Learn the policies for companies with existing MBA programs. ...
  3. Specify your reasons for pursuing the program. ...
  4. Outline the benefits to employers.

Is private equity a good career? ›

A career in private equity can be highly rewarding, both financially and personally. Private equity managers often take a great deal of satisfaction from successfully guiding their portfolio companies to new high levels of profitability.

Is CFA better than MBA? ›

While an MBA teaches you to run a business managing money, people, products, and services, you study finance and money in-depth in CFA. But you first need to understand your interests to decide between the two options. However, MBAs are better if we consider the growth factor.

How can I get into private equity with no experience? ›

Get Some Related Experience

If you can't score an internship or a first job in private equity, try a related field like venture capital, investment banking, or asset management. These firms also have little interest in hiring inexperienced business school graduates, no matter how bright.

Does private equity pay more than investment banking? ›

The bottom line is that yes, the pay ceiling is higher in private equity, and there are MDs and Partners who earn many times – sometimes hundreds of times – what MDs in banking earn.

How stressful is private equity? ›

It's extremely difficult to get into private equity, and once you're in, the job is stressful and requires long hours and sacrifices, especially when deals are in their final stages.

How many hours do people in private equity work? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

How many hours a week do private equity analysts work? ›

Private Equity Analyst Hours

To be conservative, I'll say the average range is 60 – 80 hours per week, with numbers at the top end of that range (or even above it) when a deal is in its final stages. Weekend work tends to be minimal, but it does come up when deals are in their final stages.

Is CFA useful for hedge funds? ›

Great quantitative skills with a proven track record, a deep understanding of the hedge fund industry as well specific firms, the right educational background, and certifications like a CFA, CAIA, or CHA (Chartered Hedge Fund Associate) are all helpful.

Can MBA finance become hedge fund manager? ›

An MBA is one of the best choices of a postgraduate course for getting into the field of hedge fund management. The Finance and Investment Banking specializations are best suited for this career.

Is CFA required for hedge fund? ›

Certain hedge funds require an MBA or CFA. Many people get both, but getting both is really a waste of time. If you already have an MBA, it is a much better use of time to spend the same countless hours researching good investment ideas than trying to pass a memorization test like the CFA.

How much does a VP in private equity make? ›

Private Equity Vice President Salary + Bonus: The likely range here is $350K to $500K, with about half in base salary and half in the year-end bonus.

Do private equity firms pay well? ›

For the vast majority of private equity associates, the base salary is around $135k-$155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

How do I start a private equity career? ›

To become a private equity associate, you'll need a degree in finance, accounting, statistics, or economics. To increase your marketability, you can also become certified in private equity or financial planning.

Is it hard to get a job at Blackstone? ›

Blackstone's president reveals how to nail an interview and get hired at the PE giant, where its first-year analyst acceptance rate is under 0.5%

What are the big 4 investment banks? ›

Largest full-service investment banks
  • JPMorgan Chase.
  • Goldman Sachs.
  • BofA Securities.
  • Morgan Stanley.
  • Citigroup.
  • UBS.
  • Credit Suisse.
  • Deutsche Bank.

Is it hard to work for Blackstone? ›

That's an acceptance rate of less than 0.7 per cent. "It's six times harder to get a job as an analyst at Blackstone than getting into Harvard, Yale or Stanford," said the 68-year-old billionaire.

How do I break into my VC MBA? ›

  1. Get clear on the type of investing you want to do.
  2. Understand the mind of a venture capitalist.
  3. Apply the BASE Framework.
  4. Spend 85% of your time talking to founders.
  5. Hone the skills needed to be a successful VC investor.
  6. Be an asset by providing value to VCs you want to work with.
11 Feb 2022

How much do you make in venture capital? ›

Venture Capital Salary Guide
RoleCompensation Excluding CarryShare In Carry
Associate$70,000 - $350,000Unlikely
Senior Associate$150,000 - $480,000Small
Principal or Vice President (VP)$140,000 - $340,000Increasing
Junior Partner / Partner$400,000 - $600,000Large
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Is venture capital a good career? ›

It should come as little surprise then, that venture capital jobs are in high demand. The issue is that there aren't many of them out there. Research conducted by Deloitte on human capital in the VC industry showed VC firms have a median of six employees and an average of 14 in 2020, meaning jobs are in tight supply.

Is private equity a good career? ›

A career in private equity can be highly rewarding, both financially and personally. Private equity managers often take a great deal of satisfaction from successfully guiding their portfolio companies to new high levels of profitability.

How do you break into private equity? ›

The simplest route to getting into private equity? Work two years at an investment bank, or in management consulting, after graduating from college, sources said. Then spend another two years at a private equity firm working as an analyst or senior analyst.

How much do you make in private equity? ›

For the vast majority of private equity associates, the base salary is around $135k-$155k. Then, based on fund performance, bonuses tend to range from 100% to 150% of the base salary.

Do you need an MBA to move up in a company? ›

While getting hired in an entry-level role with a bachelor's degree is by no means impossible, professionals are more likely to be chosen for senior positions if they have the added credential of an MBA. Many companies expect entry-level hires to continue their education after a few years of work as well.

Is private equity a stressful career? ›

It's extremely difficult to get into private equity, and once you're in, the job is stressful and requires long hours and sacrifices, especially when deals are in their final stages.

How much does a VP in private equity make? ›

Private Equity Vice President Salary + Bonus: The likely range here is $350K to $500K, with about half in base salary and half in the year-end bonus.

How can I get into private equity with no experience? ›

Get Some Related Experience

If you can't score an internship or a first job in private equity, try a related field like venture capital, investment banking, or asset management. These firms also have little interest in hiring inexperienced business school graduates, no matter how bright.

How much does a PE partner make? ›

At the low end, such as at a brand-new fund with a few hundred million under management, a Partner might earn in the $500K to $1 million range for base salary + year-end bonus. As fund sizes approach several billion under management, Partners move closer to an average of $1-2 million in base salary + bonus.

How many hours do private equity associates work? ›

Private Equity Associate Lifestyle and Hours

At many smaller funds and middle-market funds, you can expect to work 60-70 hours per week, mostly on weekdays, with occasional weekend work when deals heat up.

Can you go straight into private equity? ›

Private equity firms typically do not usually hire straight out of college or business school unless the student has previous significant private equity internships or work experience.

Can private equity make you rich? ›

Private equity is a very lucrative career. As an asset class, private equity has enjoyed tremendous success over the past decade. Investors around the globe continue to pile their money into private equity firms.

Why do people in private equity make so much money? ›

By contrast, private equity firms make money by exiting their investments. They try to sell the companies at a much higher price than what they paid for them. The profits are then divided up based on a distribution waterfall.

Does private equity pay more than investment banking? ›

The bottom line is that yes, the pay ceiling is higher in private equity, and there are MDs and Partners who earn many times – sometimes hundreds of times – what MDs in banking earn.

Is an MBA still worth it in 2022? ›

An MBA program is only worth the effort, expense, and time when the student plans to pursue a career in management, in a business-related field, or as a startup founder. For those employed in other sectors, unless they are in leadership or management positions, an MBA degree may not be needed.

Is MBA worth it at 30? ›

Schools and colleges provide an immense network-building space! Make the best use of it while doing an MBA at 30 or 40. Try to participate in different programs, join clubs, meet new people, interact with them, and build a strong network. And this network will make your MBA over 30 worth it.

What are the disadvantages of MBA? ›

Advantages and Disadvantages of an MBA
AdvantagesDisadvantages
Increased job opportunitiesCost of study
Personal and entrepreneurial skill developmentTime commitment
Specialized in the field of interest with management skillsLack of practical and applied learning
High salaryRisk of ROI
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27 Dec 2021

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