Insights into Private Equity: What Aspiring PE MBAs Should Know

Entering the private equity space is one of the most difficult and competitive endeavors in the finance industry. While the financial rewards can be promising, the actual process of entering the industry is extremely challenging. So, the key to entering the private equity industry is to start planning as early as possible.

The demand for entry into the private equity industry is incredibly high, which means that private equity firms only hire the very best professionals when it comes to placing new business. However, the right experience can make entering the private equity sector much easier.

These are some commonly recommended paths to enter the private equity industry:

1.           Investment banking: this is the easiest way to get into private equity firms. Private equity firms recruit top analysts from investment banking programs, so it is critical to excel during your two-year program to attract the attention of leading firms.

2.           Management Consulting: Moving from a top-tier management consulting firm to a private equity firm is similar to moving from investment banking to private equity. Some private equity firms hire high-level consultants after the first two years in consulting, particularly those with bachelor’s degrees in finance, accounting, or economics.

3.           Postgraduate studies: although less common, it is possible to join a private equity firm directly after graduation. However, it can be more difficult to move to other firms later on because of limited skills and lack of experience on the sell side, which some private equity firms place a high value on.

4.           MBA program: private equity firms also recruit top candidates from business schools that score well in their respective recruiting processes. Although this path is not as common as the previous ones, it is possible to enter the private equity business without prior investment banking or private equity experience. I must mention, however, that this path is very difficult without relevant experience, although not impossible. Pick schools with excellent curriculum and peer groups to make this transition. H/S/W, Columbia, Duke, INSEAD are some of the top names.

5. Mid Market PE firms : In addition, there is a growing trend for small mid-market private equity firms to hire outstanding valuation candidates with exceptional educational backgrounds, although this route may not be as successful.

Networking is key in getting your ticket to a promising PE role. Focus on building relationships with low- and mid-market private equity firms that may consider candidates with non-traditional career backgrounds or those seeking varied experiences.

With all of the above avenues, it is important to prepare thoroughly for interviews. Private equity firms look for candidates with stamina, intelligence, confidence, strong presentation skills, technical knowledge, company knowledge, actual business experience, and cultural fit.

If private equity does not work out, there are numerous other exciting, lucrative and challenging avenues in the financial industry.

Planning a career in Private Equity and looking for an MBA?

The following are some key tips for private equity applicants who have their eyes set on Top PE Schools

• Understanding of trends in PE
• Prior experience
  • Career changers
  • Non-career changers
• Evidence of intellectual stimulation
• A compelling goal plan

1. Understanding of trends in PE

To position yourself as a strong MBA applicant pursuing a career in private equity (PE), it is imperative that you demonstrate your in-depth knowledge and understanding of the prevailing trends in the industry PE. Admissions committees and potential employers are looking for candidates who not only possess strong financial acumen but are also familiar with the ever-evolving private equity industry. By demonstrating your familiarity with the latest industry trends, such as emerging sectors, deal structures, fundraising strategies, and market dynamics, you can showcase your ability to adapt to the changing demands of the industry.

For example, the recent downturn in deal-making and fundraising challenges due to the rise in interest rates and inflation in the U.S. following the pandemic, exacerbated by the war in Ukraine, has drastically impacted the PE industry. Banks had to withdraw financing for leveraged transitions, which is what PE is mainly about.

Therefore, business schools will expect you to be realistic about how you can use your background to get a foothold in the PE industry.

2. Prior Experience

For MBA applicants seeking a career in private equity, prior experience can be a valuable asset on the path to success. Whether you change careers or not, presenting your relevant experience can greatly enhance your application.

• Career Changers: If you are coming from a different industry, it is important to use your diverse background to your advantage. Highlight transferable skills that bridge the gap between your previous field and the world of private equity. Focus on areas where you excel, such as financial analysis, valuation, or intricate deal structures.

Some boutique firms are open to hiring career switchers. Make contacts with potential recruiters to give yourself an edge. At the same time, also remain cognizant of the chances for making a career switch if you have a specific industry focus. For example, a medical physician looking to switch to PE in healthcare focus should be aware that opportunities are very limited, as investment had already peaked after the pandemic in the US and UK.

• Non-Career Changers: If you have prior experience in the private equity industry, prioritize your expertise. Highlight your track record of deals and investments and cite specific examples that illustrate your accomplishments. Tell the stories behind your successes, highlighting the challenges you faced and the strategies you used to achieve exceptional results. Quantify your impact by highlighting the impressive returns you have achieved for investors. This demonstrates your ability to achieve financial success and builds your credibility in the industry.

3. Evidence of intellectual stimulation

Private equity requires a keen intellect and strong analytical skills. Convey a vivid image of your intellectual prowess by pointing to examples where you have tackled complex challenges head-on. Whether you have mastered rigorous academic projects, conducted groundbreaking research, or explored the depths of intellectual curiosity, make the intellectual spark and pique the curiosity of admissions committees.

Private equity requires a bold and determined attitude. Show your unwavering ambition and resilience by demonstrating your ability to succeed in high-pressure environments. Highlight moments when you excelled under tight deadlines, skillfully negotiated complicated deals, or displayed an unwavering work ethic. It’s important to show that you are willing to step away from safe positions and take risks.

Remember that private equity is a very analytical field. Conversations and understanding the psychology of business owners are ways to obtain valuable data. Private equity is an ongoing quantitative task that requires constant performance, which not everyone can do or may even want to do in the long run. As a beginner, be prepared for opportunities that are different from the glamorous aspects you may have heard about.

4. Design a compelling goal plan

Nothing is more conducive to obtaining approval than thorough research on your short- and long-term goals. When discussing your post-MBA goals in private equity (PE), it is important to consider sector specialization and geographic focus within the industry. Some PE and VC firms have special programs tailored to specific regions or industries. Highlight your understanding of these areas and explain how your skills match the requirements of these areas.

Geographic focus: demonstrate your knowledge of a specific region or country, including language skills and cultural understanding. This may make you a suitable candidate for PE companies with a geographic focus, such as those investing in Africa, India, or all of Asia.

Sector specialization: highlight your academic or professional background in a particular industry. Some companies focus on sectors such as consumer goods, healthcare, technology, or real estate. Position yourself as an asset by highlighting your expertise and experience in these sectors.

Additionally, be aware of the different stages of PE investing. Early stages include pre-seed or family/friend funding and seed or angel funding. Growth finance companies provide funding to high-revenue companies for further growth.

When articulating your goals, demonstrate your knowledge of these different types of PE /VC and explain why you are interested in a particular area. By showing that you understand the industry landscape and providing detailed career plans, you can increase your credibility as a candidate in your essays or interviews.

Getting into PE can be difficult, but with the right preparation and a clear objective, you can position yourself as a strong candidate for a career in this industry.

More on PE & VC in the coming blogs