Working at a Private Equity Firm

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Private equity firms invest in businesses which are not publicly traded and work to expand or transform them. Private equity firms typically raise funds in the form of an investment fund with a defined structure and distribution system and put that money into their target companies. Limited Partners are the investors in the fund. Meanwhile, the private equity firm is the General Partner, accountable for buying, selling, and managing the funds.

PE firms can be critiqued for being uncompromising and pursuing profits at every cost, but they are armed with extensive management experience that allows them to improve the value of portfolio companies by enhancing the operations and other functions. They can, for example assist a new executive team by providing the best practices for financial and corporate strategy and assist in the implementation of more efficient IT, accounting and procurement systems to reduce costs. They also can identify operational efficiencies and boost revenue, which is a way to enhance the value of their holdings.

Contrary to stock investments that can be quickly converted to cash Private equity funds typically require a large sum of money and may take a long time before they are able sell a target company for an income. The industry is therefore highly in liquid.

Private equity firms require experience in banking or finance. Associate entry-level associates are mostly responsible for due diligence and finance, whereas senior and junior associates are responsible for the relationships between the clients of the firm and the firm. In recent years, the compensation for these positions has increased.