The top private equity firms tend to have what Bain & Company calls a “performance culture,” meaning managers and employees are determined to do everything possible to increase the value of the companies in which they invest.
Nothing is allowed to get in the way of making their portfolio companies more profitable and valuable. Thus, a PE firm tends to look for staff who think and act like owners, people who are goal-setters and driven to measure and improve their own performance.
Private Equity firms also tend to be smaller and leaner than investment banks. The average PE firm has just five head office employees per billion dollars of capital managed, according to Bain & Company. That’s about a quarter of what you’d find at a typical corporate headquarters.
Like investment banking, the work involves long hours and plenty of number crunching. But the compensation is handsome, averaging over $250,000 annually. And a private equity job offers professionals a chance to work with senior decision-makers and actually shape the future of a company.
Unlike investment banks, which tend to be much larger and have many layers of people and more compartmentalized roles, private equity offers MBAs and other professionals more of a small-company environment and entrepreneurial culture, something that appeals to many people. For this reason, private equity tends to be a “destination” career rather than one that is used to gain experience before moving on to another field.
However, private equity is known for just-in-time hiring, perhaps pending the closing of a major transaction. This means entry-level professionals looking to break into private equity may have to wait patiently on the sidelines while their peers snap up jobs in investment banking and corporate finance elsewhere.
Well rounded business professionals are best suited for long term careers in private equity. You need to have operational experience, leadership ability, strong communication skills, financial modeling skills and a compelling personality that can inspire other members of your team.
Next time, we’ll look at the culture within venture capital firms.
References:
Yale School of Management www.som.yale.edu
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