Working at a Private Equity Firm

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Private equity firms invest in businesses that are not publicly listed and then attempt to expand or turn them around. Private equity firms typically raise funds through an investment fund with a clearly defined structure and distribution waterfall, and then they put that money into the companies they want to invest in. Limited Partners are the investors in the fund. Meanwhile, the private equity firm is the General Partner responsible for buying selling, buying, and managing the targets.

PE firms can be critiqued for being uncompromising and pursuing profits at all cost, but they possess vast experience in management that allows them to increase value of portfolio companies through improving operations and supporting functions. They can, for example guide a newly appointed executive team by guiding them through the best practices in financial strategy and corporate strategy and help implement streamlined accounting, IT, and procurement systems to cut costs. They also can identify ways to improve efficiency and increase revenues, which is one method to improve the value of their holdings.

In contrast to stock investments, which can be converted in a matter of minutes to cash Private equity funds typically require a large sum of money and can take years before they can sell a target company at a profit. This makes the industry highly illiquid.

Private equity firms require prior experience in banking or finance. Associate entry-levels are primarily responsible for due diligence and finance, while junior and senior associates are accountable for the interaction between the firm’s clients and the company. Compensation for these positions has been on a rising trend in recent years.