Working at a Private Equity Firm

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A private equity company takes a stake in a business that is not publicly listed and then is able to turn the business around or expand it. Private equity firms typically raise funds in the form of an investment fund with a defined structure and distribution waterfall, and then they invest that capital into their target companies. Limited Partners are the investors in the fund. Meanwhile, the private equity firm is the General Partner, accountable for buying, selling, and managing the targets.

PE firms are often criticised for being ruthless in their pursuit of profits however, they usually possess a wealth of management expertise that allows them to boost the value of portfolio companies by implementing operations and other support functions. For instance, they are able to guide new executive staff through the best practices in corporate strategy and financial management and help implement streamlined accounting procurement, IT, and methods to reduce costs. They can also find ways to improve efficiency and increase revenue, which is just one way they can increase the value of their holdings.

Unlike stock investments which can be converted quickly into cash and cash, private equity funds generally require millions of dollars and could take years before they are able sell a target company at profit. The sector is, therefore, highly in liquid.

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