Traditionally, it’s been rare for private equity companies to run formal graduate programmes for undergraduates straight out of university, but this is gradually changing. Blackstone Group, 3i and Terra Firma are examples of big firms that now have campus recruitment programmes.
Guy Hands, founder and chairman of private equity firm Terra Firma, tells us that they recruit graduates because they want “brilliant generalists”.
“Recruiting these professionals from the outside can be a challenge. Consultancies often have talented generalist candidates, but most of them are accustomed to playing the role of advisor, rather than principal,” he says. “We have discovered that the best way to find the type of people we need is to train them ourselves.”
The best way to find the type of people we need is to train them ourselves,
Guy Hands, Terra Firma
So, if you can’t get into private equity straight out of university, when can you? There are typically two entry points: Firstly, two to three years after graduation, following experience in the M&A or leveraged finance divisions of an investment bank. Secondly, immediately after a Masters in Business Administration (MBA), when you’ll be ushered into a role as an associate.
The hierarchy of a private equity firm is analysts (either straight from college or recruited from a second-year analyst position at an investment bank), associate, senior associate, director or principal, managing director or partner and finally the coveted role of managing partner.
The most sought-after role in private equity is that of the ‘originator’. As the name suggests these are the people seeking out new companies that the private equity firm can invest in and, ultimately, getting the deal over the line. To be an originator, you are usually a partner.
Principals appraise whether a deal is worth pursuing. If it is, they have responsibility for ensuring they have all the right documentation in place and negotiating the right price.
Junior private equity roles are fiercely fought over – there are typically around 200-300 applications for every available role and only 10% of CVs are shortlisted for interview. Yet, early stage careers are still largely focused on number crunching.
“A lot of the time you will be working with the management of portfolio companies; looking for increased profitability opportunities and cash generation,” says a director in a large private equity firm in London. “There’s also a lot of analysis and modelling around potential acquisition targets and new market entry strategies. If you’ve held the company for a while, there will also be a lot of work around whether an exit should be considered (and if so how to prepare the business for this) or whether to invest for another couple of years in order to create more value.”
There’s also a lot of analysis and modelling around potential acquisition targets and new market entry strategies
Another important job in private equity, which is often overlooked, is investor relations. Private equity firms cannot invest without funding, and it’s the investor relations teams who build relationships with potential new investors and maintain them with existing ones.
Investors are called ‘limited partners’ and they’ve become increasingly demanding since the financial crisis, demanding more information and a compelling case for investing in a particular fund, so investor relations professionals have become more prominent.