This article will explorer the challenges of entering the field of Private Equity Investing. This field has become a sought-after industry. As a result, it can be difficult to become an associate. To begin with, private equity firms look to hire entry-level staff who have a minimum of two years of experience as an investment banking analyst. In comparison to investment banks, associates that work at private equity firms are notorious for working long hours. This is common when they’re closing a deal.
Another qualification to become an associate is their education and training. In addition to the required experience is having a bachelor’s degree. The degree can be in finance, accounting, statistics, mathematics, or economics. It isn’t common for private equity firms to hire straight out of college or a business school. The exception is if the student had a private equity internship. Some private equity firms reach out to former management consultants to fill a position. Another commonality to fill a position within the firm is networking. Some companies have their preferred choice of headhunters to assist with fulfilling a vacancy.
A key factor to becoming considered for this small field is the expectation of handling the required duties. Together with experience, leadership is another major positive in any candidate. An associate will be expected to handle analytical model, portfolio company monitoring, reviewing CIMs (confidential information memorandum), and fundraising. From the aforementioned, the primary function that’s expected from the associate is to provide analysis to the principals and partners to make an informed decision about the deal. A common task would be setting up preliminary due diligence reports and modeling the expected growth forecasts.
Many people explorer the opportunity of entering this field, because of the salary and compensation. This is another reason for the competitiveness and difficulty of becoming an associate. It is not uncommon for first-year associates to make up to $250,000, and with a bonus of 25-50% off their base salary. The typical protocol for working your way up the firm is starting off as a Senior Associate, then Vice President/Principal, and finally as the Director/Partner.
In summary, a private equity associate is expected to participate in deals from inception to closing. The work is satisfying and financially rewarding.