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Private Equity Analyst

Updated on May 28, 2024
Article byWallstreetmojo Team
Edited byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

Private Equity Analyst Guide

A private equity analyst looks at undervalued companies so that a private equity investor can buy the company, take it personally, and earn profits.

Private Equity Analyst

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

Do you think getting a private equity analyst job is easy? Unfortunately, the answer is a big NO!

Private equity can be 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.

Key Takeaways

  • A private equity analyst identifies undervalued companies that can be acquired and strategically managed by private equity investors for the purpose of generating substantial profits.
  • Private equity analysts receive compensation through a combination of a fixed base salary and performance-based bonuses, with the bonus amount primarily determined by the overall performance of the fund and the analyst’s contribution.
  • Some of the top private equity firms globally include industry leaders such as Goldman Sachs Capital Partners, Kohlberg Kravis Roberts (KKR), The Blackstone Group, Apollo Management, and Bain Capital.

What is Private Equity?

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

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

But sometimes, companies look for more than just the money flowing into 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, help foster growth, and nurture the company to create additional value. For a new start-up, it could be commercializing a great idea; for established firms, it could help the management improve their existing beliefs or find companies with whom they could work jointly easily.

Along with their investment, the private equity firms raise this money from banks, pension funds, endowments funds, and savings accounts. As the company reaches its target growth, the investors sell their equity. The value 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 makes 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 equity.

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Who is a Private Equity Analyst?

  • A Private Equity Analyst or PE Analyst is a person who works primarily for private equity firms and conducts research, does ratio analysis, and gives interpretations on private companies.
  • Use due diligence, financial modeling techniques, and valuation methods to assess the advantages of investing in a private company.
  • Manage an investment portfolio or fund, which comprises partial or whole interest in the equity of the private companies in which they invest.
  • Raise money from private companies, banks, and high net worth individuals to maximize returns beyond those offered by public stock exchanges.
  • Experts forecast a company’s return on investment and define the best usage of certain investments.

What does a Private Equity Analyst do?

  • Accurate valuation: The private equity firms’ target companies are privately owned, so 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 in which it wants to invest.
  • Fulfillment of investment objective: A private equity analyst needs to determine whether the investment in a particular company would meet the funds’ goal. 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. The private equity analyst must work on the assumptions and prepare financial scenarios. With this, they could determine the optimal mix of debt and equity to maximize the return on investment.

Other things that one can include in the job profile of a private equity analyst are: –

  • Analyzing new investment prospects
  • Raising funds from corporate
  • Conduct detailed financial analysis
  • Creating financial models
  • Creating 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 on 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 Prerequisites for a Private Equity career?

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

  • If you apply for private equity analyst jobs, you require a bachelor’s or master’s degree in finance, economics, investment analysis, or accounting.
  • A Master of Business Administration (MBA) degree specializing in finance and Chartered Financial Analyst (CFA),  would always be a plus.
  • The work would be detailed and demanding. Hence, one might have to work for long hours, so ensure your lifestyle suits such a job.
  • It would involve a lot of interactions with firms, bankers, and consultants to get your project rolling. Hence, it would help if you were good at communication skills and networking.
  • The transactions are concentrated mainly on debt. So, you need sufficient knowledge of the terms and concepts, particularly a good understanding of syndicated bank loans and high yield bonds generally used in buyouts.
  • In countries like the UK and the USA, someone with a bachelor’s degree can get a break into the equity sector.
  • As a beginner or fresher, the experience can be dodged if the candidate shows good skills.

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 a strong understanding of various industries and their business models, industry structure, their works, etc. This skill will enable you to work efficiently and keep your work up-to-date in this fast-paced environment. In addition, especially if you want to make it to the top, it is important to develop excellent investment and business judgment, which could happen if you are good at researching the industries/portfolios you work upon.
  2. Analytical skills: As we already saw, the core work that a private equity analyst does is analyzing and interpreting financial statements, preparing financial models, and contemplating various financial and economic scenarios. One would require this work to provide financial insights into how a particular company stands financially, compare it with market conditions, and conduct a detailed research analysis. An analyst is expected to be good at multitasking and logical and analytical reasoning to develop creative solutions to problems.
  3. People skills: As a PE analyst, you will have to interact with many business insiders and outsiders to make contacts, which is 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. It would require good spoken and written communication and leadership skills to get the work done.
  4. Valuation skills: The most fundamental skill you would require is valuing companies with different approaches. Companies in various sectors are valued differently. Hence, you will need to learn the core valuation concepts, applications, and methods successfully.
  5. Allied skills: Other important points that need to be kept in mind are that since you would be expected to work for long hours most of the week, you should be someone with a high energy level. You should be able to seamlessly use the Microsoft Office suite (Excel, MS Word, and PowerPoint). Essentially, it would help if you were 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?

It is not as bad as investment banking regarding the number of working hours. The day for a PE analyst would start around 9.00 a.m. and end around 7.00 p.m. to 9.00 p.m., depending on the work. You might have to work on weekends subject to work-related to some urgent deal. The below infographic describes 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 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 depends on how well the investments do, there is 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 studying, it would be great if you start early in this field and opt for internships. That will enable you to have a hands-on experience in the working environment, and you will be able to decide if you fit in there. If everything goes well and you can impress your employers, you can look forward to a full-time placement there.
  • Take up campus placement opportunities: Many avoid attending campus placements considering the salary figures companies offer to freshers. But top-level and mid-level equity firms usually hire people from campuses. Hence, you need to watch the opportunities coming your way and seize them.

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

One thing that needs to be kept in mind is that while you prepare for the interviews, do not prepare very common resumes. Instead, you must match the skills and expertise with the company’s requirements. One would directly get the generic kind of resume in the trash.

Private Equity Analyst Salary prospects

Coming to the important part- Salary! That will be subjective and consider your skills, education, and experience.

Private Equity Salary
  • Your compensation as a PE analyst includes a base salary and bonus. Like other related fields, the bonus would be based on your and the fund’s performance, wherein higher weightage is given to the funds’ performance.
  • If we compare the compensation, it is marginally higher by 5% if you are an MBA than not.
  • An average private equity analyst in New York would earn $40,000 – $1,00,000 annually. In London, its GBP is 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), and career progress (future) in private equity.

Private EquityBackgroundResponsibilitiesCareer progress
Analysts
  • Before private equity, experience is not required

  • Could ask for more than one year of experience. in investment banking

  • A pre-MBA candidate

  • Financial modeling and analysis market research post-investment monitoring
Two years as an analyst before promotion to the position of associate.
Associates
  • 2-4 years of relevant experience in a PE firm
  • OR investment bank
  • OR worked in a PE environment or similar transactions
  • Review applications
  • Support the team members in negotiation and execution
  • Build a contact network
Three years as an associate before promotion to an Associate Director position.
Associate Director
  • 3-6 years of private equity investment experience
  • Begin to source and lead mid-market transactions
  • Play a significant role in 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 two to three years to promotion to Director
Director
  • Highly experienced private equity professional
  • Origination of deals
  • Post investment role
  • Make Strategic decisions
  • Key role in fundraising
Management succession offers opportunities heading international expansion within or outside 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 depend upon your interests and skills. I hope the information I shared through this post proves useful and helps you decide your future in this interesting field. All the very best!

What Next?

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

Frequently Asked Questions (FAQs)

1. What is the difference between private equity analysts and associates? 

A private equity analyst is typically an entry-level position that involves analyzing investment opportunities and conducting due diligence. In contrast, a private equity associate is a more senior role responsible for deal execution, portfolio management, and investor relations.

2. Is a private equity analyst a good career? 

A career as a private equity analyst can be rewarding for individuals interested in finance, investments, and business analysis. It offers exposure to deal-making processes and potential for career growth within the private equity industry.

3. Who recruits a private equity analyst?

Private equity firms, investment banks, asset management firms, and other financial institutions are among the entities that recruit private equity analysts. The recruitment process often involves interviews, case studies, and assessments to evaluate candidates’ analytical skills and understanding of the private equity industry.

This article is a guide to Private Equity Analyst. We discuss the details of private equity, job profile, career progressions, required skillsets, etc. 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