What is a Private Equity Associate?
Private Equity Associate, a more robust job to crack in and a desirable tag in the financial services domain, is involved in assisting other senior associates and partners to achieve a well-suited target to invest and ripe benefits via exiting it at the lucrative price, alongside performing duties such as overseeing due diligence, handling communication, preparing financial models etc.
Private companies are generally smaller in comparison to other similar players in the investing industry. Investment banking organizations, the big ones, such as ABN AMRO, Goldman Sachs, Morgan Stanley, etc. have various verticals in the investing domain, whereas private equity players invest funds (acquired by clients) across multiple investment options in public or private entities.
Roles of Private Equity Associate
An associate could be involved in a plethora of works depending upon the respective area of specialization of the firm. But, generally, an associate is responsible for receiving and sending communication teasers to clients, investment bankers, and other sell-side partners. This role also requires monitoring the financials and updates related to entities in which the firm is already invested. In the meanwhile, he/she needs to fulfill the tasks assigned by seniors of any domain, along with checking due diligence report and contacting prospective clients and companies.
How to Become a Private Equity Associate?
An esteemed job seeker should have a bachelor’s degree with a major in economics, statistics, accountancy, mathematics, etc. There are three most popular ways –
- A lot of firms hire pre-MBA students for the role of junior analysts. The prospective analysts hired through this route are involved in cold calling, emailing, and investment analysisInvestment AnalysisInvestment analysis is the method adopted by analysts to evaluate the investment opportunities, profitability, and associated risks in their portfolios. In addition, it helps them to determine whether the investment is worth it or not., etc. Later on, after taking the experience of two or more years, the students either leave for doing MBA or shifts the organization of similar standing and maybe in different domains such as Hedge FundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques., etc. The experience gained helps a lot once they return after finishing the MBA from top tier MBA colleges or B-schools, and could fast track their way to senior positions.
- Unlike MBA aspirants, very few undergrads get an opportunity to attain the entry-level posts in comparatively smaller PE funds. Though it is quite an arduous task to take entry as it broadly requires some personal connection in the organization, in addition to an intense passion toward the work to land a chance.
- PE firms open gates for graduates too, but the chances are quite slim. Most companies prefer the candidate to have the relevant experience of at least 2-3 years in a similar domain, either in the banks or in any private equity firm. Financial ModellingFinancial ModellingFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact., Valuations, and impeccable writing, along with excellent communication skills, are some relevant factors considered while hiring a freshly graduated entrant.
- MBAs from b-schools or top tier colleges possess the best chances among all candidates. If the MBA qualified student has an experience of working in the PE firms, it becomes an exceptional opportunity to enter the lower senior positions too as the cumulative experience becomes more than 2 years(considering a job or internship in the past for 2-3 yrs.). Although the MBA fresher lack the relevant exposure, still the entry in the PE firms won’t be difficult given that they have a piece of solid knowledge in Finance. As observed, most firms in this domain maintain an MBA degree as a pre-requisite for a senior position.
- There are few other ways to enter the Private equity firmsPrivate Equity FirmsPrivate equity firms are investment managers who invest in many corporations' private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP., too, such as from engineering, accounting, and consultation profiles. To migrate from other posts to the PE domain, the primary lookout is the relevant experience for the job and what the prospective employee could add from his side. Mostly, employees from the top accounting firms(involved in PE deals), engineers with a strong understanding in Finance (either acquired through the courses or otherwise), experience in investment banking vertical, could elevate the chances of getting hired because of their knowledge in different fields, contacts in the industry, and accustomed behavior towards the required work.
The Career Path of Private Equity Associate
As private Equity firms are quite smaller in terms of investments involved and a number of employees concerning investment banking firms, a strict corporate culture, and hierarchy levels are amiss. An entry-level associate could also collaborate with the seniors such as Principal or Vice President, and avail a thorough knowledge of the deal from the originationDeal From The OriginationDeal Origination is a strategy used by firms to find investment prospects, either by gaining industry knowledge or by forming a deal for themselves using their connections with the involved parties. till the end.
- Associate or Entry-level Positions – It is the lowermost position in the hierarchy of PE firms, though a flatter hierarchy career prevails. The work involved in the tedious and rigorous one, such as preparing models of entities, doing initial screening, due diligence reporting, assisting higher management in acquiring new opportunities, filling up on everything that seniors require.
- Principals or Senior Analyst – This position is of mid-senior level, and apart from handing over various tasks to associates or analysts, they are involved in deal sourcing, internal due diligence, strategic policies, negotiations, communicating with partners, and using their connections to gain insight or new deal for the firm. This position mainly consists of MBAs from top business schools and MBA colleges with an experience of somewhat 3-6 yrs.
- Partner or Managing Director – These are the senior-most persons in the organization and authorizes the ultimate controls over the entity. These are involved in communications, sourcing deals, negotiations, and investments for the PE firms. Being in constant touch with investors, investment bankers, portfolio companies are some of the most important and crucial tasks headed by the Partners of the organization.
- Due to the smaller size in the nature of Funds invested, and employee counts, private equity firms offer affluent knowledge of the domain, even to an entry-level associate. A new entrant could quickly expect to see a deal from end-to-end, even in their first year.
- As generally, principals are responsible for deal-making, investing decisions, and allotment of work amongst employees; there is also the active participation of most seasoned employees in the organization. The effortless and non-obstructive communication flow allows the new-comers to mingle with seniors and a steep opportunity to learn and showcase their talent and effort rendered.
- Despite such a rich experience, a private equity associate lives a peaceful life when compared to an investment Banker. It is not a 9-5 job but mainly offers an enjoyable weekend to live on, and enjoy an excellent work-life balance to catch up on family, friends, and other hobbies.
As PE firms are quite small, it is challenging to join them. Even once crossing this barrier, in public opinion, it’s complicated to switch to other roles as there is a flatter hierarchy as leading to the position could become severe, and though it is a less stressful job than investment banking, still it could be tiresome at times.
Although the PE associate role has its cons, it’s is quite an excellent opportunity to work in a PE firm to achieve a holistic knowledge about investing and funding. It unveils the opportunity to grow faster in the mentor-ship of wise, refined, and seasoned senior partners.
This article has been a guide to the Private Equity Associate and its definition. Here we discuss how to become a private equity associate, career path along with advantages and disadvantages. You may learn more about financing from the following articles –