Working at a Private Equity Firm
A private equity firm buys the ownership of a business that is not publicly listed and then seeks to turn the company around or expand it. Private equity firms raise money in the form of an investment fund with a defined structure, distribution funnel and then invest it in the companies they wish to invest in. The fund’s investors are referred to as Limited Partners, and the private equity firm is the General Partner in charge of buying, managing, and selling the funds to maximize returns on the fund.
PE firms are often criticised for being ruthless in their pursuit of profit However, they typically have extensive management expertise that allows them increase the value of portfolio companies through operations and other support functions. For instance, they are able to guide new executive staff through the best practices for corporate strategy and financial management and help implement streamlined accounting, procurement, and IT systems to drive down costs. They can also boost revenues and discover operational efficiencies which will help them increase the value of their assets.
Unlike stock investments that can be converted quickly into cash, private equity funds usually require a huge sum of money and can take years before they can sell their target companies at a profit. The industry is therefore highly liquid.
Private equity firms require experience in banking or finance. Associate positions at entry level focus on due diligence and financing, whereas senior and junior associates focus on the relationship between the firm and its clients. In recent times, compensation for these roles has increased.
Last updated: Agosto 20, 2024
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