What is a Private Equity Associate?

Explanation

Private companies are generally smaller than other similar players in the investing industry. For example, investment banking organizations, the big ones, such as ABN AMRO, Goldman Sachs, Morgan Stanley, etc., have various verticals in the investing domain. In contrast, 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. Meanwhile, they must fulfill the tasks assigned by seniors of any domain, check the due diligence report, and contact prospective clients and companies.

How to Become a Private Equity Associate?

An esteemed job seeker should have a bachelor’s degree 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 employed through this route are involved in cold calling, emailing, 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.read more, etc. Later on, after taking experience for two or more years, the students either leave to do MBA or shift to an organization of similar standing and maybe to 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.read more, 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 entry-level posts in comparatively smaller PE funds. It is quite an arduous task to take entry as it broadly requires some personal connection in the organization and an intense passion for the work to land a chance.Private equity firms open gates for graduates too, but the chances are quite slim. Most companies prefer the candidate to have relevant experience of at least 2-3 years in a similar domain, either in the banks or private equity firms. In addition, 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.read more, valuations, impeccable writing, and excellent communication skills are relevant factors considered while hiring a freshly graduated entrant.MBA students from B-schools or top-tier colleges possess the best chances. Suppose the MBA-qualified student has experience working in private equity firms. In that case, it becomes an exceptional opportunity to enter the lower senior positions, too, as the cumulative experience becomes more than two years (considering a job or internship in the past for 2-3 years). Although the MBA fresher lacks the relevant exposure, entry into the private equity firms would not be difficult given that they have a solid knowledge of finance. Most firms in this domain maintain an MBA degree as a prerequisite for a senior position.Other ways to enter pivate 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.read more, include engineering, accounting, and consultation profiles. For migrating from other posts to the private equity 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 accountingTop AccountingPricewaterhouseCoopers (PwC) LLP, Ernst &Young LLP, Deloitte LLP, KPMG LLP, and Grant Thornton LLP are among the top accounting firms that provide services to various individuals, organizations, and other entities.read more firms(involved in private equity deals), engineers with a strong understanding of finance (either acquired through the courses or otherwise), experience in the investment banking vertical could elevate the chances of getting hired because of their knowledge in different fields, contacts in the industry, and habituated behavior towards the required work.

The Career Path of Private Equity Associate

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As private equity firms are smaller in investments and have several 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 the 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.read more till the end.

  • Associate or Entry-level Positions – It is the lowermost position in the hierarchy of private equity firms, though a flatter hierarchy career prevails. The work involved tedious and rigorous ones, such as preparing models of entities, doing initial screening, due diligence reporting, assisting higher management in acquiring new opportunities, and filling up on everything 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 MBA graduates from top business schools and MBA colleges with an experience of somewhat 3-6 years.Partner or Managing Director – These are the senior-most persons in the organization and authorize the entity’s ultimate controls. These involve communications, sourcing deals, negotiations, and investments for private equity firms. Being in constant touch with investors, investment bankers, and portfolio companies is some of the most crucial tasks headed by the organization’s partners.

Advantages

  • Due to the smaller size, like funds invested and employee counts, private equity firms offer affluent domain knowledge, even an entry-level associate. As a result, a new entrant could quickly expect to see a deal from end to end, even in their first year.Principals are generally responsible for deal-making, investing decisions, and allotment of work amongst employees. There is also the active participation of the most seasoned employees in the organization. The effortless and non-obstructive communication flow allows the newcomers 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 compared to an investment banker. It is not a 9 a.m. to 5 p.m. 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.

Disadvantages

As private equity firms are small, it is challenging to join them. Even once crossing this barrier, in public opinion, it is complicated to switch to other roles as there is a flatter hierarchy since leading to the position could become severe. Though it is a less stressful job than investment banking, it could still be tiresome at times.

Conclusion

Although the private equity associate role has cons, it is an excellent opportunity to work in a private equity firm to achieve a holistic knowledge of investing and funding. In addition, it unveils the opportunity to grow faster in the mentor-ship of wise, refined, and seasoned senior partners.

This article is a guide to the Private Equity Associate. We discuss how to become a private equity associate, its career path, advantages, and disadvantages. You may learn more about financing from the following articles: –

  • Carried InterestPrivate EquityHow to Get Into Private Equity?Capitalization Table