Working at a Private Equity Firm
A private equity firm buys a stake in a business that is not listed publicly and attempts to turn the company around or increase its size. Private equity firms raise money through an investment fund with a defined structure, distribution waterfall, and then invest it in the companies they want to invest in. The fund’s investors are known as Limited Partners, and the private equity firm serves as the General Partner in charge of buying and selling the target companies to maximize the returns on the fund.
PE firms are sometimes critiqued for being uncompromising in their pursuit of profit They often have extensive management expertise which allows them to enhance 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 of corporate strategy and financial management and help implement more efficient accounting, procurement, and IT methods to reduce costs. They can also boost revenues and discover operational efficiencies which will help them improve the value of their assets.
Private equity funds require millions of dollars to invest and it can take years to sell a business at a profit. This is why the sector is in liquid.
Private equity firms require prior experience in finance or banking. Associate entry-level associates are responsible for due diligence and finance, while senior and junior associates are accountable for the interaction between the clients of the firm and the firm. In recent years, compensation for these positions has risen.