02 Ago Working at a Private Equity Firm

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A private equity firm buys an ownership stake in a company that is not publicly listed and works to turn the company around or grow it. Private equity firms typically raise funds in the form of an investment fund that has an established structure and distribution plan and put that money into their target companies. Limited Partners are the investors in the fund, and the private equity firm is the General Partner accountable for buying, selling, and managing the funds.

PE firms are sometimes criticized as being ruthless in their pursuit of profit however, they usually have an extensive management background that allows them increase the value of portfolio companies through operations and other support functions. They can, for example help guide a new executive team by guiding them through the best practices in corporate strategy and financial planning and assist in implementing streamlined IT, accounting, and procurement systems to lower costs. They can also find ways to improve efficiency and increase revenue, which is one way they can enhance the value of their possessions.

Unlike 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 to sell a target company at a profit. In the end, the industry is extremely illiquid.

Private equity firms require prior experience in finance or banking. Associate associates at entry-level work mostly on due diligence and financing, whereas senior and junior associates focus on the relationship between the firm and its clients. In recent years, the compensation for these roles has increased.