Working at a Private Equity Firm

Private equity firms invest in businesses that are not listed publicly and then work to grow or turn them around. Private equity firms typically raise funds through an investment fund that has a clearly defined structure and distribution waterfall, and then they put that private equity firm money into the companies they want to invest in. Fund investors are referred to as Limited Partners, and the private equity firm serves as the General Partner responsible for purchasing and selling the targets to maximize profits on the fund.

PE firms can be criticised for being brutal and seeking profits at all price, but they have extensive management experience that allows them to boost the value of portfolio companies by enhancing operations and supporting functions. They can, for instance, guide a new executive team through the best practices in financial and corporate strategy and assist in implementing streamlined IT, accounting and procurement systems to lower costs. They can also identify ways to improve efficiency and increase revenue, which is just one way to improve the value of their possessions.

Unlike stock investments that are able to be converted quickly into cash however, private equity funds typically require a large sum of money and may take years before they are able sell a target company at a profit. The industry is therefore highly liquid.

Private equity firms require previous experience in finance or banking. Associate positions at entry level focus on due diligence and financing, whereas junior and senior associates are focused on the relationship between the firm and its clients. Compensation for these positions has been on a rising trend in recent years.