If you are armed with an MBA and want to work in private equity, there are two intangible qualities you must demonstrate. Firstly, you need to prove that you’re a ‘winner’. Secondly, and perhaps most importantly, you must show that you can fit into the organisation.
‘Fit’ is incredibly important when getting into a private equity firm. Junior candidates meet with just about everyone in the business and the ‘beer test’ – essentially whether senior partners feel they can spend some drinking time with a candidate - are used to vet candidates beyond their technical abilities.
Unfortunately, this means the unconscious bias inevitably slips into the recruitment process. “When PE firms hire MBAs, it’s our experience that they generally choose someone native to the market they operate in,” says one specialist private equity recruiter speaking on the condition of anonymity. “80% of the MBAs we place into European private equity firms are European. It’s just the way it is.”
There are certainly a proliferation of Europeans within the senior ranks of UK private equity firms. Most of the senior team at Coller Capital herald from the UK or Europe, while partners Tom Hall, Nico Hansen, Steven Dyson and Frank Ehmer at Apax are also European. At BC Partners, principal Stelios Elia is Greek and Stefano Ferraresi, a senior partner, is Italian.
This is bad news for a lot of European business schools, which take on a large proportion of students from outside the UK and Continental Europe. Getting into private equity with little experience is tough enough, but if you’re a foreign student taking an MBA in Europe with the eventual aim to move to the buy-side, local bias makes it even tougher.
“There’s the cultural fit element within the organisation – this is particularly the case in UK PE firms – but it’s also led by commercial interests,” says the private equity recruiter. “You’re much more likely to be know the cultural nuances of dealing with clients if you’re from the country they operate in.”
There’s one business school that UK-based private equity recruiters suggest funnel a lot of students into European private equity firms – INSEAD. “It’s easily the most successful business school for getting their students into European PE firms,” claims another private equity headhunter who declined to give their name because of the sensitivity of the subject. “Part of this is because they have a higher proportion of European students than other local business schools, but they also put a lot of effort into preparing their students for working in the industry.”
There are some INSEAD graduates in the senior ranks at prominent private equity companies. Joe Cronly, a senior partner at BC Partners, has an MBA from INSEAD, as do Georgios Koulouris, managing partner for private equity at Anacap Financial Partners and Jean-Mark Jabre, who works in private equity at Morgan Stanley in London, for example.
A spokesperson from INSEAD tells us that there are 1,000 INSEAD alumni working at private equity firms globally and that its private equity club – run by MBA students – “serves as a forum for those interested in all aspects of the private equity industry.”
Its latest employment report suggests that 13% of the class of 2013 secured a job in private equity or venture capital. The average salary for those employed by PE firms was €102.7k ($111k), with a sign on bonus of 17%, while VC recruits received the biggest average salary of any financial sector (€112.3k), with a 33% sign on bonus.
At London Business School, which is renowned for its MBA career prospects in financial services, 6% of this year’s class went into private equity.