Private equity

 

Private equity funds have become a major force in the global economy, and the growth of the sector is expected to continue in the future. As they require similar skill-sets, private equity firms are competing with investment banks to attract graduates into the sector.

Like investment banks, private equity firms raise money for companies that need an infusion of capital, in order to provide their own investors with a profit. Unlike investment banks, they raise the initial capital from individual wealthy investors and private funds. It is a useful way of raising capital for companies that are not traded on a stock exchange.

Private Equity firms normally invest in less mature companies in expanding sectors - known in Britain as Venture Capitalism - or else will buy-out a more mature company, becoming the owners or co-owners of the business. In an ideal situation they will restructure the acquired company - turning around an unprofitable business - and later sell it for a profit; or alternatively break it up and sell its assets separately - a process known as 'asset stripping'.

The private equity industry has grown steadily over the past two decades with the equity invested in UK businesses growing by 22% per annum since the early 1980s to reach almost £12 billion in 2005. Over the past six years, private equity funds have raised nearly £70 billion of capital for investment into unquoted businesses, £27 billion of this in 2005 alone.

In recent years the largest private equity firms - such as the Carlyle Group, which employs world-famous statesmen - have attracted much media attention for multi-billion dollar "mega buy-outs". However, there are also numerous mid-tier firms that acquire and invest in smaller companies.

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Routes in

Most people coming into this sector tend to have three or so years experience in a similar area, such as investment banking and consulting. Headhunting is also common within this sector.Graduates seeking to work in private equity will need to demonstrate strong analytical ability and mathematical skills. They will need to be able to work effectively within a team and be confident and outgoing. An ability to develop and maintain strong and successful client relationships will also be essential.

Graduate training schemes and internships

There are very few graduate training schemes and internships within private equity as most positions go to experienced hires or are a result of headhunting. The following do exist, though remember competition is high:

Get experience

Completing an internship within private equity is competitive and there are very few opportunities. But there are other ways to gain relevant experience. You could complete an investment banking internship or take part in volunteering, extra curricular activities and work experience to gain the skills necessary to succeed in this industry.

Job roles

Breaking into the industry can be difficult as recruiters often expect you to have some experience. Top employees are usually headhunted from investment banks and consultancies, to move over to private equity. Professionals in the top echelons of the industry - who identify opportunities, initiates and close deals - receive enormous compensation. Private equity firms employ accountants, analysts, lawyers and consultants to assess the potential profitability of deals and to manage acquired businesses.

Analysts

This entry level position would require you to analyse economic spreadsheet data, source new deals and liaise with potential new clients, create models, analyse and research the market to present to senior members to take to clients and conduct any other duties required. You will work with a cross section of professionals as you pull together information and resources.

Associates

This role is similar to that of an analyst but they will take on a negotiation role but will still support more experience members of the team. With three to four years of experience this role would require you to begin making contacts too.

Skills and qualities

Graduates seeking to work in private equity will need to demonstrate strong analytical ability and mathematical skills. They will need to be able to work effectively within a team and be confident and outgoing. An ability to develop and maintain strong and successful client relationships will also be essential.

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