Working at a Private Equity Firm
A private equity firm buys an interest in a company that is not listed publicly and attempts to turn the company around or to grow it. Private equity firms raise capital through an investment fund with a defined structure, distribution funnel and then invest it in the companies they want to invest in. Limited Partners are the investors in the fund, whereas the private equity firm is the General Partner responsible for buying, selling, and managing the funds.
PE firms are often critiqued for being uncompromising and seeking profits at all cost, but they are armed with years of management experience that allows them to increase value of portfolio companies through next improving operations and supporting functions. For example, they can guide new executive teams through the best practices of corporate strategy and financial management and help implement streamlined accounting, procurement, and IT processes to cut costs. They also can find operational efficiencies and boost revenue, which is just one way they can increase the value of their holdings.
Unlike stock investments that can be quickly converted to cash and cash, private equity funds generally require a huge sum of money and may take years before they can sell their target companies at a profit. As a result, the market is extremely inliquid.
Working at a private equity company typically requires previous experience in finance or banking. Associate entry-levels are primarily responsible for due diligence and finance, whereas junior and senior associates are accountable for the interaction between the clients of the firm and the company. Compensation for these roles has been on a rising trend in recent years.