Private equity drives innovation, productivity, and undeniable profits. Its impact on the modern economy cannot be overstated—across all sectors, there are companies in need of investment and expertise, and private equity firms promise to give these enterprises the boost they need.
This potential to shape businesses and the economy as a whole is highly compelling to many of today’s most ambitious finance professionals, so it’s easy to see why private equity is such an attractive field. Unfortunately, this means that breaking into private equity can be exceedingly difficult. To help you get a solid start, we reveal how to get a job in private equity and which private equity roles are worth pursuing.
The Growing Popularity of Private Equity as a Career
Private equity (PE) represents an increasingly popular career path within the modern financial space. Its appeal is apparent: Private equity is exciting and lucrative yet still manages to deliver a reasonable work-life balance. This is also a highly passion-driven profession, so it attracts a great deal of attention from ambitious individuals with a compelling desire to make a difference in specific sectors or by supporting certain types of organizations.
Insights from Ernst & Young indicate that PE activity has recently shown a significant uptick. With these ever-more prominent deals comes a need for strong PE talent that can support transactions and drive growth. Another report from Heidrick & Struggles should be especially promising for anyone hoping to break into PE. These insights assert that “the market has been particularly active at the more junior levels, where firms have needed more people to execute, and the time to hire has shrunk markedly, from months to weeks.”
What Do Private Equity Firms Do?
The role of the private equity firm can seem complicated, but the concept is actually quite simple. These firms aim to improve companies believed to have high potential, especially those facing challenges preventing them from truly making their mark. These are often growth-stage companies, although mature organizations may also call for assistance from private equity firms.
The private equity model involves purchasing private stakes, which may be funded directly by the PE firm or by other investors. From there, PE firms strive to deliver targeted improvements, typically by boosting operations or cutting costs. Through the act of purchasing stakes, investors are able to gain greater control over how these companies are operated.
Advantages of a Career in Private Equity
Because private equity is such a competitive and demanding career path, you will want to uncover your why well before attempting to enter this field. Understanding the deep-seated reasons behind your professional maneuvers can keep you on track as you face the inherent challenges of the industry and ensure you leverage your passion and skills to make a meaningful difference where it’s needed most.
Below, we highlight several of the most compelling benefits of working in private equity beyond just the expected (like the potential to earn an impressive income) to detail the intrinsic value of this career path.
High Earning Potential
There is no denying that private equity is a lucrative field. Six-figure annual salaries are the norm, with many professionals breaking $100k shortly after they’ve earned their master’s degree. Salary data from Glassdoor reveals an annual pay range of between $148k and $258k, encompassing both the base pay and substantial bonuses.
Impressive financial opportunities may continue to arise long after breaking into the field; moving into roles like vice president or principal, for example, results in a significant compensation boost (as noted in the aforementioned Heidrick & Struggles report).
Investment in Promising Companies
There’s more to private equity than six-figure salaries and discretionary bonuses—though these are definite perks of the job. In addition, PE professionals can feel fulfilled helping promising companies reach their potential. This has a broad impact on the economy at large and is what keeps passionate PE analysts, associates, and other professionals striving for important deals.
Long-Term Value Creation
One of the central objectives of any private equity firm is to drive long-term value. This can be achieved by pursuing several strategies, such as:
- Multiple expansion
- Leverage
- Operational improvement
No matter how long-term value is acquired, PE professionals take great satisfaction in knowing their efforts have made a discernible difference.
Variety of Industries
Many PE professionals focus on specific types of enterprises, often drawing on industry-relevant experience to deliver powerful insights where they are needed most. For instance, PE firms may be entirely dedicated to driving growth and innovation in the healthcare sector. Private equity is also increasingly prominent within the tech sector and even in transforming agriculture, education, and hospitality.
Rewarding Career Progression
The private equity career path is defined quite clearly, and for many ambitious professionals, this is a huge advantage. There is a certain confidence in knowing what exactly the typical career progression entails and how key steps or requirements can be satisfied along the way. This career track typically centers around the following steps or job titles:
- Analyst or associate – Responsible for due diligence, business plan analysis, and working with service providers, this role is the vital first step toward establishing a successful PE career. Many successful associates eventually become senior associates.
- Vice president – Sometimes referred to as “deal quarterbacks,” VPs handle high-level business plan analysis as well as provide oversight for analysts and associates. Board exposure can be expected, along with a growing proprietary network.
- Principal – Upon obtaining sufficient experience with the board of directors, accomplished investment professionals could take on the esteemed role of principal. Direct involvement in negotiations is expected, with many principals tasked with closing deals.
- Managing director or partner – As top decision-makers, managing directors source deals, conduct negotiations, and generally oversee PE firms. These are the most senior positions that involve extensive work with companies once deals are closed.
Private Equity Careers
Private equity is far more diverse as a career field than many people realize. Not only is the scope considerable due to the range of industries requiring support from PE firms, but there are also many ways to provide that support. We highlighted the standard career progression already, but this field provides additional opportunities beyond the typical analyst and associate roles. Other jobs in private equity include:
- Strategy and diligence manager
- Account executive
- Investor relations coordinator
- Chief investment officer (CIO)
Private Equity Career Path
The clearly defined private equity career path nearly always begins with a graduate-level education, though some junior analyst roles may be available to students at the undergraduate level. The Master of Business Administration (MBA) has long been the gold standard for entering private equity, as this degree provides not only comprehensive coursework in finance and leadership but also offers the unique chance to build a strong professional network. Once you earn this key credential, you can move on to these next steps:
Get an Entry-Level Position
The typical professional journey in private equity begins with an entry-level position. This allows you to expand on the skills you’ve already gained through your MBA program, putting central concepts into action. Chances are, your first forays into the world of private equity will involve the role of analyst or associate. These positions may be competitive, but they open the door to a bright future in PE.
Climb the Ladder
After acquiring a few years of experience as a private equity analyst or associate, you should be prepared to take on new responsibilities. If you’ve achieved associate status, the natural progression is to become a senior associate. This largely resembles the previously described role of associate, but with a higher status and more demanding work.
Eventually, you could be ready to make the most significant leap on the PE career ladder: becoming a vice president. This involves extensive oversight of the PE firm’s day-to-day functions, so it’s an excellent role for management-minded professionals. Some senior associates who are qualified to become VPs instead move into adjacent professions—working, for example, in wealth management or as investment directors.
Become a Private Equity Principal or Partner
For many aspiring PE professionals, the ultimate marker of success is becoming a principal, director, or partner at a PE firm. This represents an exciting opportunity to drive the firm as a whole, handling everything from investor sourcing to fund management.
How to Get Into Private Equity
Private equity is notoriously competitive. Even entry-level positions, such as private equity analyst or associate, can be difficult to obtain. If you are determined to enter this field, you should prepare to fully commit to the process and employ a successful networking strategy. While knowing the right person can be key, this must also be underscored by comprehensive finance and management skills, not to mention a healthy dose of passion. Take these steps to streamline your path into private equity:
1. Build an Educational Foundation
As discussed, an MBA is essential for breaking into the realm of private equity. Beyond this, however, you will want to tailor your MBA program based on your unique professional goals. The ideal solution? Selecting a concentration that closely aligns with your professional goals and personal interests.
2. Form Relevant Skills
There is more to your MBA than the chance to develop an impressive resume. Throughout the program, you will have the chance to hone various crucial competencies. These include soft skills such as critical thinking, communication, and creativity, plus strong quantitative skills and a thorough grasp of financial analysis.
3. Gain Experience
There’s no denying the importance of skill development, but these are far more impactful if applied in real-world environments. Thankfully, an MBA provides plenty of opportunities to accomplish exactly that. Some MBA students work as PE analysts while enrolled, which makes it easier to see how concepts covered through MBA coursework actually play out in the PE environment.
Start Your MBA at UTC
As you prepare for an exciting career in private equity, don’t underestimate the value of an MBA. This is a critical step on the path to private equity success. At the University of Tennessee at Chattanooga, you can find the guidance and encouragement you need. Reach out to UTC today to learn more, or apply for our MBA program.
