Many, if not most, private equity firms are structured as partnerships, with the founders of the firm acting as general partners and the various investors – whether institutional or individual – being limited partners.
Thus the general partners are the senior members of the firm, responsible for managing the partnership, sourcing deals, overseeing the investments of the firm, and managing partner relations.
A senior partner in charge of operations would be responsible for day-to-day operating tasks such as accounting, back-office operations, technology and HR. Today, some private equity firms grow in size to have dozens of staff, so it’s not uncommon for large firms to hire a dedicated CFO or COO to function in this role.
Of course, finding the right companies to invest in and sourcing the financing are the lifeblood of a private equity firm, and this responsibility falls upon the most senior partners of the firm (usually the founders). While vice presidents and senior associates play a supporting role, it is the senior partners who have the experience and contacts to generate deal flow. They are also the ones to oversee the investments once the deal gets done. This level of oversight may vary depending on the importance of the deal, from sitting on the investee company’s board of directors to simply monitoring the progress of a particular company. It’s not unusual for a senior partner to be involved with 10 or more portfolio companies, and sit on the board of several.
Finally, partners are also actively involved in finding new sources of capital, and maintaining good relationships with existing investors. Other skills required of a successful partner in a private equity firm include keeping up with industry trends, attending and speaking at industry trade shows, and mentoring junior members of the firm. It’s been noted that the “training” program at private equity firms is a somewhat informal process. Talented professionals move from associate to VP to principal to partner largely due to the senior partners’ ability to transfer knowledge and mentor them.
What key skills should a partner in a private equity firm have? Naturally, since the founders of many private equity firms are the partners, hiring a new partner from the outside is an infrequent occurrence. But a quick scan of recent listings at JobSearchDigest.com does reveal a few opportunities.
A private equity firm based in Paris needed a partner to focus on the health care sector. Their fund would be making growth and buyout investments throughout Europe, targeting traditional healthcare companies. This professional would work with the founding partner of the firm and an investment manager to build the fund’s operations and deal flow. Obviously, a strong background in the healthcare sector and transaction experience in the sector is a must. Given the location, fluency in a second language would be a plus.
Another private equity firm, in the Middle East, wanted a new partner with European private equity experience. This person would join the firm as a senior partner, and be responsible for setting up a team and enabling the firm to expand its operations into the European market. In this instance, having an exceptional track record of sourcing and originating deals and executing private equity transactions would be the key. And the compensation package and carry being offered was quite attractive.
As we’ve seen, while most partners in private equity firms are the founders of the firm, there are opportunities for successful and ambitious vice presidents or principals to move up to partner level by joining other firms.
Next time we’ll look at the role of the partner at venture capital firms.
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