Working at a Private Equity Firm

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Private equity firms invest in businesses that are not listed publicly and work to expand or turn them around. Private equity firms usually raise funds in the form of an investment fund that has a defined structure and distribution waterfall, and then they invest the funds into their targets companies. Limited Partners are the investors in the fund, and the private equity firm is the General Partner, accountable for buying or selling the fund and overseeing the targets.

PE firms are sometimes criticised for being ruthless in their pursuit of profit, but they often possess a wealth of management expertise that allows them to boost the value of portfolio companies by implementing operations and other support functions. They can, for example help guide a new executive team through the best practices in financial and corporate strategy and assist in implementing streamlined IT, accounting and procurement systems to lower costs. They can also boost revenue and improve operational efficiency that can help them improve the value of their assets.

Unlike stock investments that are able to be converted quickly into cash however, private equity funds typically require a lot of money and may take years before they can sell a target company for an income. This is why the sector is illiquid.

Private equity firms require prior experience in finance or banking. Associate entry-level associates are mostly responsible for due diligence and finance, while senior and junior associates are accountable for the relationship between the firm’s clients and the company. Compensation for these roles has been on a rising trend in recent years.