Working at a Private Equity Firm

A private equity firm takes the ownership of a business that isn’t listed publicly and attempts to turn the company around or expand it. Private equity firms raise money in the form an investment fund with a defined structure, distribution funnel and then invest it in their chosen companies. Fund investors are referred to as Limited Partners, and the private equity firm serves as the General Partner responsible for buying, managing, and selling the target companies to maximize the returns on the fund.

PE firms are often criticised for being ruthless in their pursuit of profit however, they usually have an extensive management background that allows them to increase the value of portfolio companies by implementing operations and other support functions. They can, for example guide a newly appointed executive team by guiding them through the best practices in corporate strategy and financial planning and assist in the implementation of streamlined IT, accounting, and procurement systems that reduce costs. They can also boost revenue and find operational efficiencies which will help them improve the value of their assets.

Unlike stock investments which can be converted quickly into cash however, private equity funds typically require a important source large sum of money and can take years before they can sell a target company at a profit. This makes the industry highly in liquid.

Working for a private equity company typically requires prior experience in finance or banking. Associate associates at entry-level work mostly on due diligence and financing, while junior and senior associates focus on the relationship between the firm and its clients. Compensation for these roles has been on an upward trend in recent years.