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GUEST COMMENT: Face it kid, you’re not good enough to get into PE

Yes, it is still possible to get hired into private equity with no previous buyside experience (I know, I did it not so long ago myself). Rumours of more sellside cuts make this sound pretty tempting, if you can see past the buyside cynics.

However, getting a job in PE is by no means a cakewalk.

Interviews will be gruelling, even if you can get a foot in the door. I’ve had to write out an LBO model with a pen and paper and calculate accurate returns under various scenarios. If, bizarrely, that sounds easy to you, imagine you have a difficult personality sitting next to you asking you challenging questions as you go. Not fun. You’ll also be expected to have an excellent view on the PE industry, demonstrating knowledge of hot topics (“pretend I’m George Osborne or Vince Cable and argue convincingly that the newly increased Capital Gains Tax rate will be bad for UK Plc”).

It’s a people business – funds typically list names of entire team on their website (including the secretaries). Know about them all, because if you make the wrong impression on just one team member you’re sunk.

Expect to be assessed on your ability to deal with a lack of hierarchy. You’ve been used to periodic promotion in banking. That won’t happen in most PE funds, where you only get moved up the food chain when someone at the top leaves. The corollary to this is a lack of team variety. Banking is big enough that if you don’t like your colleagues on one project you can work with others next time around until you find people that you’re comfortable with. In a team of fifteen or so (the median size of small- and medium-cap funds and of the sector teams most large-cap shops silo juniors into) that can’t happen. And if your colleagues are anything less than close friends who are very happy with the standard of your work, you can wave goodbye to the carried interest which makes millionaires of buyout gurus.

Due to the way that most deals are sourced, you’ll also need a strong network of business contacts. Banks are usually not the best places to develop this and you’ll have to have made extra efforts to do so. Be prepared to ring up contacts shown on your LinkedIn profile during an interview, on speakerphone. If the third one in a row refuses to take a call from your personal mobile phone during the day, consider yourself rumbled. True contacts are only those who’ll make time for you regardless of their workload.

Can you show an understanding of valuation and investment risk? This is a very real worry for buyout professionals when they hire bankers used to presenting the “blue sky scenario” by default. The more experienced the banker cum would-be-dealmaker, the greater the suspicion that they’re adept and sweeping real risks under the carpet.

And finally, you’ll need insights into deal structuring in the post credit-boom era. Many private equity industry professionals themselves haven’t figured out these new paradigms, but why would they want to hire from banks unless to infuse the sector with new ideas?

The author is a former investment banker, now working in private equity.

Comments (17)

  1. Come off it, there is nothing special about PE professionals. All you need is a big name uni and BB experience (plus languages)..no offense nothing special there. The only reason PE exists is because LPs are staffed with incredibly thick people who like to glamour of being associated with the big PE guys and going to dinners/parties with them! See the idiots who continue to inject equity into EMI! Take away the leverage game and PE guys dont really bring much to the table (low hurdle rates and thick investors enabling the GPs to make astounding annuity income)!

  2. Why is PE so elitist, while HF guys make way more money? Maybe they should start hiring people who perform, rather than the guy with the prettiest CV?

  3. Overblown article, plenty of very good people get into PE straight out of uni, you just need to be from a top university, top grades and 1-2 internships which isn’t impossible feat to achieve by graduation day.

  4. “New paradigms”?!

  5. The difficulties that you have encountered and have listed here are not insurmountable. The major hurdle for getting into PE is that you have to have followed a precisely defined path.

    You seem to be talking about small-to-mid market PE shops. These firms are mostly staffed by ACAs who have gone through Audit and then Corp Fin at a Big Four. A few BB IBers may be found but, in my experience, IBers prefer the larger funds as this is where their deal experience is best utilised.

  6. Don’t listen to these arrogant PE-assholes. There is nothing special about them, monkeys with limited skills set.

  7. PE is all but finished. We are seeing a few deals but this is the last gasp before the final death knell. Avoid PE like the bubonic – whether you be an aspiring employee or investor.

  8. I’m not sure what’s more laughable, the article or the comments (Shaz aside). The article is full of nonsense, but at least there’s the odd bit of sense – but you commentators are spewing out vitriolic nonsense (especially “thefutire” and “Amy”) as a knee-jerk reaction without actually weighing up the pros and cons of PE. Why do you let an anonymous article annoy you so much?!

    Unfortunately eFC is full of both extremes, with very few sensible people down the middle. Good luck guys.

    ActualMegafundAssociate Reply
  9. right, and how exactly are these masters of the universe going to make money…? P E used to be private equity, but now should be P I = pretty irrelevant.

  10. I love these guys who say : you are not good enough to do what I do (i.e : but I’m good enough, i’m the king of da world)… So arrogant that it becomes funny

    DoNotWantToWorkInPE Reply
  11. wagga wagga

  12. PE is only fun & lucrative if you’re a partner or if it’s your money

  13. yeh i know that

  14. PE is a non sense job.

    The best job is where i work…I spend all day and night modelling, doing cut-n-paste of pitches and advising clients on star-trek like deals.
    Being a monkey in IB is really a good job, the future

  15. ..Fairly ignorant comments on both sides of the spectrum here. Since I work in a mid-market PE fund as an analyst (joined straight from University), I can clearly point out that it is possible to go straight in from Uni.

    In terms of generating returns in the ‘new paradigm’, in the mid-market especially, they are going to come from doing buy and builds or roll-outs (or essentially how PE made their returns before the heady days of 2003-2007). Gone are the days of being the highest bidder in an auction process, gearing it like crazy and flipping it 2 years down the line for an increased multiple. However, sensible business plans with a clear strategy for buying and building a leading business in an attractive niche will still generate excellent returns. It isn’t rocket science. Buy a platform, bolt on small, very cheap businesses and sell on to a larger PE firm/trade buyer once you have built a solid business. You get clear multiple arbitrage and a very attractive ROE.

  16. Private equity may not be so good… but banking (advisory) is one of the most basic and zero value added job in the world..

  17. I was never any good at PE anyway

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