Private Equity Analyst

Private Equity Analyst Guide

Private equity analyst is an equity analyst who looks at companies that are undervalued so that a private equity investor can buy the company, take it private and earn profits.

Private equity can be broadly defined as investment in the private, unlisted companies by assuming higher risks and hoping for substantial returns. Becoming a private equity analyst is a dream for almost any Finance professionals.

Do you think that getting a job as a private equity analyst is easy? The answer is a big NO!.

Private equity can be really interesting if you enjoy interacting with people, conducting research, doing due diligence, and managing finance portfolios for people. What I aim to do through this article is to assist you in exploring private equity as a profession and to give you a clear picture of what you would be as a private equity analyst.

Private Equity Analyst

What is Private Equity?

To help you understand this, answer my question- what is that the start-up companies and well-established companies have in common? It’s simple; they both require investment/capital to grow. This growth could mean building more manufacturing plants, recruiting more people, or rejuvenating the existing products. Such investments could also help in buying another company or save a company from closing down.

So, where does this investment come from? It could be borrowing from some bank or selling shares and raising money from the stock exchange.

But sometimes companies look for something more than just the monies flowing in the company. They want investment from someone who could guide them in building their business. This role is played precisely by a private equity firm.

The private equity guys become a part of the company, usually at the board level, and help foster growth, nurture the company to create additional value. For a new start-up, it could be commercializing a great idea, for established firms, it could be to helping the management improve their existing ideas or find companies with whom they could work joint handedly.

The private equity firms, along with their investment, raise this money from banks, pension funds, endowments funds, savings account. As the company reaches its target growth, the investors sell their equity. The value which is created is shared among the people who provided the original investment.

Hence we can say that Private equity is not an advisor but an investor who creates or build better businesses.

One thing to keep in mind is that private equity funds invest in assets that are owned privately or that are publicly owned, but the private equity buyer plans to take private.

Who is a Private Equity Analyst?

What does a Private equity analyst do?

  • Accurate valuation: The companies that the private equity firms target is privately owned, and hence the market price of their stock is not determined. Hence the role of an analyst becomes crucial to provide an accurate valuation of the company’s shares where it wants to invest.
  • Fulfillment of investment objective: Another thing that a private equity analyst needs to determine is whether the investment in a particular company would meet the funds objective. For this, the analyst needs to do a thorough financial statement analysis and compute the correct present value of a company’s projected earnings.
  • Determine optimal capital structure: There is a situation where the private equity firms would consider changing the capital structure of the company it invests in. Here the private equity analyst will have to work on the assumptions and prepare financial scenarios. With this, he/she could determine the optimal mix of debt and equity to maximize the return on investment.

Other things which could be included in the job profile of a private equity analyst are;

  • Analyze new investment prospects
  • Raise funds from corporates
  • Conduct detailed financial analysis
  • Create financial models
  • Create corporate presentations
  • Write investment committee memorandums.
  • Interact with the management
  • Manage and observe the portfolio investments
  • Provide backing to the structuring, due diligence, negotiation, and financing of the investments
  • Provide periodic review reports of existing portfolio companies to the investors
  • Conduct research and gather relevant data of the industry and competitors

Additionally, the tasks of the private equity analyst will depend on the investment strategy that a private equity firm undertakes at a particular point in time.

What are the Pre-requisites for a Private Equity career?

If you considering the entry-level jobs in private equity, it would be that of a Private Equity Analyst or Associate.

What skills must a Private equity analyst possess?

Private equity analyst Skills
  1. Strong Industry knowledge: If you are planning to take up a private equity career, you need to possess strong knowledge of various industries and their business models, industry structure, it works, etc. This skill will enable you to work efficiently and keep your work up-to-date in this fast-paced environment. Especially if you want to make it to the top, it is important to develop excellent investment and business judgment, which could happen only if you are good at conducting research on the industries/portfolios you work upon.
  2. Analytical skills: As we already saw, the core work that a private equity analyst does is of analyzing and interpreting the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more, prepare financial models, contemplate on various financial and economic scenarios. This kind of work would be required to provide financial insights into how a particular company stands financially, comparing it with the market conditions carrying out detailed research analysis. An analyst is expected to be good at multi-tasking, logical and analytical reasoning to come up with creative solutions to problems.
  3. People skills: As a PE analyst, you will have to interact with a lot of business insiders and a lot of outsiders to make contacts, which is very critical to your success. It involves interacting with the senior members of private equity firms to acquire intelligence on existing and potential investments and internally get the work done with your teammates. You should be capable of creating positive and productive relationships for the business. In all, it would require good spoken and written communication, leadership skills to get the work done.
  4. Valuation skills: The most fundamental skill that you would require would be valuing companies with different approaches. Companies in different sectors are valued differently. Hence you will need to learn the core valuation concepts, its application, and methods successfully.
  5. Allied skills: Other important points which need to be kept in mind are that since you would be expected to work for long hours most part of the week, you should be someone with a high energy level. You should be able to seamlessly use the Microsoft suite (Excel, MS Word, and PowerPoint). Inessential, you need to be a self-motivated professional who is practical, high on ethics, and result oriented.

What would be the typical working day of a private equity analyst?

When it comes to the number of working hours, it is not as bad as compared to investment banking. The day for a PE analyst would start around 9.00 am and end around 7.00 to 9.00 pm, depending on the work. You might have to work on weekends subject to work-related to some urgent deal. The below infographic would describe the typical tasks that a PE Associate or a Private Equity analyst would do throughout the day.

Day of a Private Equity Analyst

The work culture at PE forms either could be a casual work environment or even like traditional corporates where you work in cubicles. In addition, since the major part of their reimbursement is dependent on how well the investments do, there exists a culture of performance.

What would be the job and salary prospects for a Private equity analyst?

Private Equity Analyst Job Prospects

  • Look for internships: If you have decided to make a career in private equity while you’re still studying, it would be great if you start early in this field and go for internships. This will enable you to have a hand-on experience of how the working environment is, you will be able to decide if you fit in there. If everything goes well and you are able to impress your employers, you can surely look forward to a fulltime placement there.
  • Take up campus placement opportunities: Many avoid going for campus placements considering the salary figure companies offer to fresher’s. But there are top and mid-level equity firms that usually hire people from campuses’ and hence you need to keep a watch on the opportunities coming your way and seize them.

If you are experienced in investment banking, trading, consulting for a year or two in a specific industry, it is going to be considered by the recruiters.

One thing which needs to be kept in mind is while you prepare yourself for the interviews, do not prepare resumes, which are found very common. You need to match the skills and expertise you possess with what the company requires. Believe me, the generic kind of resumes would directly be got in the trash.

Private Equity Analyst Salary prospects

Coming to the important part- The Salary! This is going to be subjective and will take into consideration your skills, education, and experience.

Private Equity Salary

source: Indeed

  • Your compensation as a PE Analyst includes base salary and bonus. Like other related fields, the bonus will be based on your and the fund’s performance, wherein higher weightage is given to funds’ performance.
  • If we compare the compensation, it is marginally higher by 5% if you are an MBA as compared to not having an MBA.
  • In New York, an average Private Equity analyst would earn 40,000 – $1,00,000 a year, and in London, its GBP 23,000–58,000.

# The leading private equity firms throughout the globe include Goldman Sachs Capital Partners, Kohlberg Kravis Roberts (KKR), The Blackstone Group, Apollo Management, and Bain Capital.

Private Equity Career Progression

The below table will define the Past (background), Present (Responsibilities), Career progress (Future) in Private equity.

Private EquityBackgroundResponsibilitiesCareer progress
Analysts
  • Prior to private equity, experience not required
  • Could ask for more than 1 year of experience in investment banking
  • A Pre-MBA candidate
Two years as an analyst before promotion to the position of an associate
Associates
  • Review applications
  • Support the team members in negotiation and execution
  • Build a contact network
Three years as an associate before promotion to the position of an Associate director
Associate Director
  • 3-6 years private equity investment experience
  • Begin to source and lead mid-market transactions
  • Play a significant role on larger transactions.
Two to three years in this role before promotion to Investment director
Investment Director
  • Minimum five to six years of private equity experience;
  • Running deal teams
  • Responsible for the execution process
  • Decision-making responsibility
  • Main points of contact externally
Minimum of  two to three years to promotion to Director
Director
  • Highly experienced private equity professional
Management succession in the firm offering opportunities Heading international expansion within or outside of the firm

Conclusion

One great thing about challenging jobs like being a private equity analyst is that it provides you with invaluable experience. But it would be difficult for anyone to judge if this would be the correct career option for you. That decision would completely be yours and would depend upon your interests and skills. I hope the information I shared through this post proves useful and helps you to decide your future in this interesting field. All the very best! :-)

What next?

If you learned something new or enjoyed the post, please leave a comment below. Let me know what you think. Many thanks, and take care. Happy Learning!

This article is a complete guide on a Private Equity Analyst that provides you with details of what is a private equity, what is private equity analyst job profile, career progressions, skill set required, and salaries. You can learn more about Private Equity and Venture Capital from the following articles –

Reader Interactions

Comments

  1. Carmen says

    This is the first article that briefly describle this analytical role ( it’s quite detailed to me in fact !), which i never find the similar article from other blogs. Much appreciate your sharing !

    • Dheeraj Vaidya says

      Thanks for your kind words!

  2. Chirag says

    Great article – I am on the verge of finishing my MBA from Kellogg. Will appreciate if you can provide any guidance on switching careers into the PE Industry – My background has been engineering and have worked for 10 years in the field. My major is Finance for my MBA

    • Dheeraj says

      Hey Chirag, many thanks. not sure if one can jump to PE industry directly. In most cases, students join an Investment Bank and then move to PE Industry. With your background, you should not find it too tough to enter in this Industry.

      All the very best,
      dheeraj

  3. Jit says

    Hello sir,

    Actually i am getting a job in Private equity research, but I am confused as I have worked in A/C & finance for more than 7 years. I just want to know the scope & challenges in Indian Scenario.

    Eagerly awaiting for your reply

    • Dheeraj says

      Hi Jit,

      If private equity fascinates you, then you should join this job! It has great potential in the Indian Scenario.

      thanks,
      Dheeraj

  4. Addison says

    Thank you for giving out such useful information on the PE industry. I have been religiously following your blog from recent times and I really enjoy reading your blog. It is indeed very informative!

    • Dheeraj says

      Thank you Addison!

  5. Judy says

    Thanks a ton for this great article and information. I have done an internship at one of the investment Banks for three months and i wish to know if that would be helpful in getting placed at any of the PE firms?

    • Dheeraj says

      Hi Judy,

      An internship in Investment banking should definitely help. All the best!

      Regards,
      Dheeraj

  6. ARINJAY says

    This is very helpful in understanding. You have explained it in simple terms so that one can abstract.

    Thanks for sharing your knowledge !

  7. nishant says

    sir,

    I am a CA final student and i am very interested in investment banking. Can you guide me where i should start.

  8. Jadon says

    Would CFA credential help better in getting through Private Equity jobs?

    • Dheeraj says

      Hello Jadon,
      CFA can help you build credentials in the financial industry and will definitely be a plus when applying for Private Equity jobs.
      Thanks,
      Dheeraj

  9. Nehash says

    Thank you for such good blog posts. I enjoy reading them and is also giving me a good heads up on the various finance areas.

    • Dheeraj says

      Thanks Nehash! :-)

  10. Samara Jones says

    The overall article is quite comprehensive, Thanks. I have a question that Is venture capital a form of private equity?​

  11. Vivek Pandey says

    Hi Sir,

    Thanks for sharing this article. We get the clear and in depth knowledge about Private Equity.

  12. Disha says

    Thank you so much Sir for such an informative article.

    • Dheeraj says

      Its my pleasure Disha!

  13. AR says

    Thanks for the great article!

    From an Indian perspective, do you think it would be possible for a Chartered Accountant to break into PE with no prior experience? In case yes, should only mid market funds be targeted?

    • Dheeraj says

      Hi,

      there is a possibility of a charted account to break into PE with no experience. I have seen some of my CA friends moving into the investment banking domain and later shifting to Private Equity.

      All the very best,
      Dheeraj

  14. Misheck says

    I really needed the information contained in the article. Thanks man for the insightful stuff.

    Ngiyabonga (Ndebele for thank you)

    Misheck

    • Dheeraj says

      Thanks Misheck! I am glad you liked the post.

  15. Manish Kumar says

    Thanks…..for your valuable inputs. Its great feeling to get your article every time.

    Thanks,
    Manish

    • Dheeraj says

      Thanks Manish :-)

  16. Manoj Jha says

    Sir
    It feels good and helpful always whenever we get an article from your side due to its simplicity on complex issues. Easy to grasp a typical thing.
    Thanks
    CA Manoj

    • Dheeraj says

      Hello Manoj,

      Many thanks for your kind words. :-)

      Best,
      Dheeraj

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