Working at a Private Equity Firm

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Private equity firms invest in businesses that aren’t publicly traded, and then work to grow or transform them. Private equity firms raise money in the form of an investment fund that has a predetermined structure, distribution waterfall and then invest it in their target companies. Limited Partners are the investors in the fund, whereas the private equity firm is the General Partner responsible for buying, selling, and managing the funds.

PE firms can be critiqued for being uncompromising and pursuing profits at every price, but they have years of management experience that allows them to enhance the value of portfolio companies through improving operations and supporting functions. They could, for example help guide a new executive team by providing the best practices for financial and corporate strategy and assist in the implementation of more efficient IT, accounting and procurement systems to lower costs. They also can find operational efficiencies and boost revenues, which is one method to increase the value of their holdings.

Contrary to stock investments that can be converted in a matter of minutes to cash however, private equity funds typically require millions of dollars and may take a long time before they are able sell their target companies at profit. The industry is therefore highly illiquid.

Working at a private equity company typically requires previous experience in banking or finance. Associate entry-levels are primarily responsible for due diligence and financials, while junior and senior associates are accountable for the relationship between the clients of the firm and the company. In recent years, the pay for these positions has risen.