There has never been a more exciting time to pursue a career in private equity (PE). Traditionally a tough field to break into, PE is where challenge meets reward: employees take on significant responsibilities and reap substantial benefits. From a talent perspective, PE is entering a period of change, making it an attractive career choice for ambitious people driven to make an impact.

From the industry’s point of view, ensuring the right people are in place to support growth has climbed the executive agenda. Talent management is now ranked as the top priority for PE firms of all sizes after increasing assets under management (AUM), signaling that major changes to hiring practices and retention initiatives are incoming.

Already there are signs that some PE firms are becoming more open-minded about candidate profiles, targeting younger workers with atypical backgrounds. For those already with PE experience, many are now seeking a faster route to seniority by moving to smaller firms. And firms are in turn responding to increased workforce mobility by offering better incentives to stay.

The opportunities to carve out a fulfilling career in PE are undoubtedly multiplying, but it can still be difficult to know where to start. This article aims to solve this problem by answering some of the most common questions asked by people considering a career in PE.

What are the different types of PE firms?

PE firms are typically defined by the strategies they use to invest their funds. So, when we talk about different types of PE firms, we are usually talking about the way they go about making a return on their capital.

For anyone interested in entering the PE field, understanding these differences is a crucial starting point. Here’s a brief overview of the main kinds of PE investment strategies.

Buyouts

Buyout firms invest in established companies, often ones that are underperforming or have untapped potential. They acquire controlling stakes using a mix of equity and borrowed funds, a method known as leveraged buyouts (LBOs). Once they take control, buyout firms work to improve operations, streamline costs, and enhance profitability. The goal is to sell the company at a higher value after implementing these improvements. Investments in buyouts typically last between 5-7 years.

Venture capital

Venture capital (VC) firms target early-stage startups with high growth potential, especially in innovative sectors like technology and biotech. They provide the necessary capital and also offer strategic guidance and networking opportunities to help these young companies grow. The aim is to nurture these startups until they reach a stage where they can be sold at a significant profit or go public. VC investments generally have a longer horizon, often lasting 7-10 years or more.

Growth equity

Growth equity firms invest in successful, well-managed companies that require additional capital to expand operations, enter new markets, or finance significant acquisitions. They typically take minority or majority stakes without taking full control, focusing on accelerating the company’s growth. The goal is to help these companies scale up and increase their market value. Growth equity investments usually last around 3-7 years, aiming for substantial growth during this period.

What are the key roles in private equity firms?

Private equity is known for attracting top talent. Unlike larger financial institutions like investment banks, PE firms have a flatter structure. In many firms, this allows entry-level team members to work closely with principals and partners, gaining exposure to senior leadership earlier. Let’s explore the roles within a private equity firm and what each entails.

Analyst

Analysts are entry-level professionals in private equity firms, primarily involved in financial modeling and analysis. Typically, candidates hold a bachelor's degree in finance, economics, or a related field and have 2-4 years of experience, often recruited from investment banks, accounting, or consulting firms.

Main Responsibilities:

Financial Modeling and Analysis

Analysts perform a significant amount of foundational work, such as creating financial models and conducting initial analysis to support investment decisions.

Supportive Role in Deal Processes

Analysts assist in deal sourcing, reviewing potential investments, and monitoring portfolio companies. Their involvement is more supportive, handling tasks like setting up conference calls, sifting through data, and assisting associates with research and documentation.

Preparation for Advanced Responsibilities

By working closely with senior team members, this role offers valuable exposure to the deal-making process and prepares analysts for more advanced responsibilities.

Associate

Associates in private equity occupy a mid-level role focused on deal execution and portfolio management. Typically, candidates have an MBA or several years of experience in investment banking or consulting.

Main Responsibilities:

Deal Execution and Portfolio Management

Associates play a crucial role in ensuring accuracy and viability in deals. Once an investment is tentatively approved, associates take on more complex modeling responsibilities, preparing detailed due diligence reports and growth forecasts to inform decision-making by principals and partners.

Monitoring and Screening

Key responsibilities include monitoring assigned portfolio companies and maintaining up-to-date financial results. Associates screen confidential information memoranda (CIMs) for potential investment opportunities, providing concise summaries for the senior team.

Support in Fundraising

During fundraising efforts, associates assist with preliminary activities, such as preparing marketing materials and conducting initial outreach to potential investors, while senior executives manage client relationships and interfaces.

Vice Presidents & Principals

Vice Presidents (VPs) and Principals in private equity firms hold senior roles that focus on overseeing deal sourcing and management. These positions require extensive experience in private equity, finance, or corporate strategy.

Main Responsibilities:

Deal Sourcing and Management

VPs and Principals are responsible for managing deal teams, identifying new investment opportunities, and working closely with senior partners on strategy and negotiations. They play a crucial role in guiding deals from inception to completion.

Client Relations and Presentations

Unlike junior positions, VPs focus more on client relations. They are skilled negotiators who manage relationships with potential and current investors.

In-House Management and Mentorship

VPs and Principals also oversee the in-house management of the firm. They mentor associates and analysts, ensuring that junior team members are developing the necessary skills and knowledge.

Managing Directors & Partners

Managing Directors (MDs) and Partners hold top leadership roles in private equity firms, responsible for strategic decisions and overall firm management. These positions require a proven track record in private equity, strong industry connections, and leadership traits like agility and adaptability.

Main Responsibilities:

Strategic Decisions and Firm Management

MDs and Partners are responsible for making high-level strategic decisions that guide the direction of the firm. They oversee the firm’s operations, ensuring that all activities align with its long-term goals.

Company Representation and Client Relationships

Partners primarily focus on representing the company, securing funding, and managing client relationships. They are skilled negotiators who work to convince Limited Partners (LPs) to provide funding.

Other key roles

Deal-making roles may be the most visible in private equity, but there are also functions that are critical to the smooth running and success of every PE firm. These roles span several disciplines, all providing essential support for the firm’s activities including working on deals. These include:

Legal 

Legal teams lead on compliance, manage contracts and take care of all legal aspects of deal-making and day-to-day operations. Navigating the legal complexities of private equity is challenging, so their legal expertise is essential.

Communications

Managing a PE firm’s image, maintaining investor relations and handling internal communications are all responsibilities that fall to the Comms team. A typical day might see the Comms team field media inquiries, draft press releases, craft messaging, and ensure all communications are consistent with the firm’s strategy.

Operations

The Ops team ensures the firm’s internal processes all run smoothly. Specifically, this means managing resources, improving efficiency and supporting the operational needs of both deal teams and portfolio companies.

HR

The HR team in a private equity firm is tasked with the important goal of attracting top talent in the industry, as well as developing strategies for retaining and motivating staff. With culture becoming increasingly important, HR is taking a more active role in guiding the process of building and maintaining the culture of the firm.

It should be clear by now that there are many routes into private equity – for those interested in both deal-making and non-deal roles. There are even opportunities to join content teams, who work diligently on articles like this one, providing insight into the world of private equity.

What skills do you need to work in private equity?

Working in private equity requires a diverse set of skills, blending financial expertise with strategic thinking and interpersonal abilities. Here are some of the key skills needed to succeed in PE:

Financial Modeling and Analysis

Proficiency in financial modeling and analysis is crucial. This involves creating detailed financial models to evaluate potential investments and assess their viability.

Due Diligence

Conducting thorough due diligence is a critical part of the investment process. This includes analyzing financial statements, assessing market conditions, and identifying potential risks.

Strategic Thinking

The ability to think strategically and see the big picture is essential. PE professionals must identify growth opportunities and value-creation strategies for portfolio companies.

Negotiation Skills

Strong negotiation skills are important for closing deals and securing favorable terms. This involves negotiating with company management, investors, and other stakeholders.

Emotional Intelligence (EQ)

The ability to understand your own emotions and understand and influence those of others is essential for leadership, collaboration, and client relationship management.

Of course, this list is not exhaustive, but it points to a blend of financial acumen, strategic insight, and strong analytical skills, complemented by ‘softer’ skills. In fact, the latter is taking on increasing importance, with the likes of EQ, empathy and inclusive communication ranking highly in recent surveys of industry leaders. With increasing automation coming to the PE industry, demand for the ability to deliver the ‘human touch’ will only grow.

What qualifications do you need to work in private equity?

To work in private equity, you typically need a strong educational background and relevant experience. Most professionals hold a bachelor’s degree in finance, economics, or a related field. An MBA or advanced degree is often preferred, especially for mid-level and senior roles. Relevant work experience, such as in investment banking, consulting, or corporate finance, is just as highly valued.

Do I need industry experience to work in private equity?

Gaining real-world business experience is a powerful way to break into private equity. Hands-on roles in operations, management, or strategy within a specific industry provide the insights needed to stand out to PE firms. In fact, many are now making ‘strategic HR’ moves, building out teams with consulting and operating experience to better support portfolio companies.

EQT, for example, is an advocate of this kind of experience, taking inspiration from the Wallenberg family’s legacy of industrial expertise. A blend of financial acumen and deep operational understanding allows teams to effectively transform companies. The Wallenbergs’ entrepreneurial history underscores the importance of combining these skills to drive sustainable growth – a combination that continues to earn EQT industry recognition.

What steps can I take to prepare for a career in private equity?

Staying informed and continuously improving your skills are key to succeeding in PE. Here are some steps that can help you get a foothold in the industry:

Stay up to date on industry trends

Reports by McKinsey, Bain and Preqin offer a rich resource for staying on top of industry trends.

Join professional organizations

Membership of bodies like the CFA and ACG can provide opportunities for learning and development. Many hold regular networking sessions as well as tailored courses.

Upskill with self-study courses

With many elite universities and specialist providers now offering self-guided online courses, the opportunities for upskilling are endless, wherever you are on your PE career path.

Challenge meets reward

A career in private equity is both challenging and rewarding, offering significant responsibilities and substantial benefits for those with the right skills and drive. Understanding the different types of firms, key roles, and essential skills should be enough for those considering a move into PE to frame their thinking. If you feel PE is the right fit for you, assess yourself against the requirements discussed above and think about how you might round out your skills and experience.