Chances are that you’ve already heard of private equity. It’s one of those terms that the majority of us hear thrown about, but never really know what it actually means.

But if you’re going to succeed in a corporate career, it’s important that you educate yourself in areas that are unfamiliar to you. Do this so that you don’t get left out of any important conversations, and that you know what different opportunities lie out there for you too!

So, it’s about time that you get to grips with private equity. Learn what it is, who it attracts, what different types of private equity are out there and any other relevant information!

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What Actually Is Private Equity?

When it comes down to it, private equity is simply a set of financial assets that are unavailable for public exchange. They are investments that are made within a private company without ever being brought to public knowledge.

The entire sector is, consequently, extremely discreet and subtle. Unless you’ve been actively involved in private equity, it’s highly unlikely that you’ve ever heard any specifics of any private equity deals being made.

If capital assets are allocated to the purchase of a public equity company, the public equity company will lose its status as a public equity institution on the stock exchange.

Why Engage with Private Equity?

People generally invest in private equity because they want to benefit from increased rates of return. This is generally achieved by getting involved in a private equity firm, who will invest significantly in a company.

They also gain significant or complete control of the company that they are investing in, make majorly profitable changes to the company and its structure, then exit their investment has made a huge profit.

Who Tends to Engage with Private Equity?

There are plenty of opportunities for private equity out there. But private equity never tends to be a solo venture. Instead, you will generally have to become part of a firm to be able to flourish in the field.

Salary

When we look at pretty much any job role, we tend to take the salary into consideration. This isn’t all too surprising. After all, the majority of us work to be able to maintain a good quality of life and we want to be able to afford a nice home, car, vacations, and other possessions or experiences.

So, what kind of money could you be looking at if you were to get involved in private equity? Well, there’s no single answer to this. After all, there are a host of different positions and average pay can vary around the world. Let’s take a look at some averages for a few different roles within private equity.

• Analyst – if you are an analyst, your base salary is likely to be around $80.7k per annum. You are also likely to receive a total annual cash compensation of $104.10k This takes your total remuneration to $110.60k a year!
• Associate – associates are the next step up the ladder. They can expect a base salary of $107.7k. Their total annual cash compensation is generally $157.3k. They can also benefit from long term incentives or carried interest. This will usually total $66.2k. So the total remuneration comes to $178.4k per annum.
• Senior Associate – if you are promoted to being a senior associate, your base salary rises to an average of $138k a year. Total annual cash compensation boosts to $198.4k and the long term incentives or carried interest can jump to $145.9k. Total remuneration becomes $264.5k annually.

Is Private Equity Difficult To Get Involved In?

Generally speaking, private equity is often believed to be one of the most complex areas of the finance sector. You are likely to have to have a whole lot of expertise and experience to successfully identify good opportunities and make the right decisions to benefit everyone with the outcomes. But it’s not impossible to get involved. There are plenty of routes in. Here are just a few to consider.

• Directly from a Degree – it’s pretty rare to step straight from a degree into private equity. After all, experience is a major factor when it comes to choosing between candidates and when most people leave university, they have no previous experience and are on the beginning rungs of the career ladder. But increasing numbers of firms are beginning to create graduate programmes, where they source candidates straight from university, train them up in the field, and then offer more permanent jobs down the line. So, if you are in this position, keep an eye out for opportunities. There may be some out there.
• Investment Banking – the most common route into careers in private equity is to start out as an investment banker. Now, this is a fully fledged career in its own right. But it can also serve as a good starting block for progressing onto private equity down the line, should you so wish. Top tier private equity firms tend to source analysts from impressive investment banking analyst programmes. However, don’t necessarily expect to be able to move straight over from an investment banking firm to a private equity firm. You are likely to spend a minimum of two to three years working in investment banking before you will be seriously considered for a private equity role.
• Consulting – some private equity firms will also source candidates from consultancy firms. There are plenty of transferable skills between private equity and consulting, so if you have a lot of consulting experience, chances are that you might be considered a viable candidate.

Is It Possible to Get Into Private Equity with No Experience?

As we have mentioned, there may be a few graduate programmes out there that could see you enter private equity with no experience if you have a sufficiently strong academic background. But can you get into private equity with no experience and no academic background?

Well, if we’re going to be honest, it is extremely difficult to land this kind of position with this kind of resume. But nothing is impossible. If you have the right contacts, you might be able to work your way into the lower rungs of private equity and then progress upwards. This will entail a whole lot of networking and you need to be ready for rejection and springing back up onto your feet to try again.

Private equity really is a complex area to get to grips with. But hopefully, you now have a better understanding of what you can stand to gain from it and what exactly it entails!

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Mike MacDonald

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