Breaking into the Industry
Hopefully by now you realize there's nothing truly typical about working for private equity firms--they're some of the most dynamic companies on Wall Street. And the experiences you'll receive in working for one can rarely be duplicated anywhere else.
There's no one single path into a private equity career. As we noted earlier, the top firms are starting to recruit at the graduate and undergraduate levels. But there are other avenues to explore. If you're an experienced hand at investor relations, for example, you could become a welcome addition to a private equity company's fund raising and investor relations team. A whiz at financing could easily help a firm obtain credit for a buyout or to raise expansion capital for a portfolio company. And anyone working at a top Wall Street investment bank could well find a place in the deal making division of a private equity firm.
But you may not need a Wall Street pedigree, either. "I was a deputy comptroller at a portfolio company when they found me," says one top operational consultant for a private equity firm. "I had all these ideas my company considered, but when the buyout came, I had it all in writing and went to the new bosses. I ended up as CFO by the time we were IPOed four years later, and then went to work for them fixing other companies."
You may not even find yourself with an office at the private equity company, yet you'll be working for them over and over again. These companies are very adept at finding top talent within the ranks of portfolio companies. And these individuals may be called upon to take similar roles at new portfolio companies to work their magic again and again. At the most extreme, some private equity companies have their own preferred chief executives, like Bob Nardelli, one-time Home Depot CEO, who now holds the same title at the Chrysler Group thanks to old friends at Cerberus who were impressed with his ability to contain costs throughout this career.
Paths within the Private Equity Firm
Once you're working at a private equity firm, despite the general mobility and performance-based atmosphere of most private equity firms, moving to new positions within the company can be difficult, and cross-pollination between divisions is rare. The skills needed to raise money from institutional investors and those needed to obtain the best financing aren't dissimilar, but they require training. Likewise, it can be one thing to identify operational weaknesses within a target company and quite another to implement solutions.
The top management of most private equity firms come from the ranks of those who can identify potential deals, and then close said deals. Fund raisers are important, but ultimately don't have the know-how to spot great investments. Likewise, operations experts can take what they're given and improve upon it, but are very much used to getting things done with the full authority of management behind them, rather than through delicate negotiation.
That's not to say that the deal makers rule the roost entirely. As we've seen, the top people in each of the firm's divisions have to sign off on any given investment. But so much hinges on the firm's ability to identify the best investments and get them on board, so it's no surprise that people like Henry Kravis or Stephen Schwarzman are deal makers first and foremost.
That's not to say there isn't anycross-training. Kravis and Schwarzman are deal makers, of course, but even they will make time to schmooze with an institution pondering a billion-dollar investment with the firm. An operations expert may be called upon to have input on any given deal negotiations. And a fund raiser and financier may work together to ensure the company can put enough money together in enough time for a deal to work. But generally, everyone has a role and a job to do--most of these firms are too small to dedicate the time necessary to cross-train any but their top employees.
Yet, as mentioned above, you can become one of those top employees--all you have to do is execute well, over time, on everything you're given. A challenge, but one that most attracted to this industry should welcome.
There's more to life than deal making at private equity firms. There are numerous career paths you can choose upon entering the field, and even more should you decide to leave. If you perform well, the vast majority of your options will be fulfilling and lucrative.