Private Equity Associate: The Complete Guide | BankingPrep

Private Equity (PE) is one of the most prestigious jobs at Wall Street. Private Equity Associate and Analyst are the two most common entry points. Therefore, here we will deep dive into the job responsibility of those two positions, career path, salary and how to get into Private Equity via those two entry points.

1. Private Equity Associate’s Job Description

Private Equity has 3 main activities: Fundraising, Operational Management, and Investment, which is called “deal” work.  The Associate will be involved in each activity of the “deal” work and lead the process from start to finish.

Moreover, associates will handle some “non-deal” work including managing companies’ portfolios, screening for investment opportunities, and supporting the management team.

A typical day of an Associate:

  • Join the meeting with their boss or other team members to discuss active deals and potential deals.
  • Build a financial model for an active deal or review and adjust an existing one.
  • Conduct a conference call with the owners of a private company that has the potential to sell to your firm to get a new deal.
  • Review customer contracts in the database to reraise the new deal.
  • Monitor the company’s portfolio and keep the financial reports up-to-date. 
  • Follow up with the fundraising process and setting up webinars with “potential Funders”.
  • Conduct another call with different advisers or management consultants who are involved in the deal from earlier in the day to define strategy. 
  • Finish some administrative work such as editing NDAs or conducting market research.

A daily schedule of a Private Equity Associate:

Working as an Associate, you are among the highest-paying jobs at Wall Street as well as one of the busiest workers. Here is the schedule of a typical Associate:

8 AM: Having a cup of coffee at home, spending time reading Financial Time, and The Wall Street Journal while you are on the way to the office.

8:30 AM: You arrive at the office, and go through your emails. If you receive any investment teaser from an investment bank that fits your fund’s investment criteria, you decide to share the idea to your Vice Presidents to put into consideration.

9 AM: Review an LBO model template for a different investment opportunity created by one of the Analysts. If you find out the management team has ridiculously optimistic projections, so you assign the Analyst to adjust the scenarios with lower numbers.

11 AM: You make a call with some private companies to catch up on any news or any events occurring in the sector you cover. 

12 PM: You have lunch while catching up with your colleague about the recent deals. If you receive a few teasers from bankers marketing different companies, you send it to your Analyst to review half of them after lunch.

1 PM: You join a call with outside lawyers and accountants to carefully check their research on a deal that has been dragging for months.

2 PM: You check on your Analyst to see the progress of the LBO model template as well as the task you assign at lunch. You also ask your Analyst to fix the formatting of some financial data and update the internal model for one portfolio company that just reported results. You’ll use these figures in your pitch deck to potential new Limited Partners.

5 PM: Conduct a frequent call with the advisers and management consultants – who are involved in the deal from earlier in the day to see the progress and define the current problems.

6 PM: Conduct the meeting with your Analyst and Vice President to discuss some of the teasers from earlier in the day to see which deals the fund should take.

8:30 PM: You complete all of your tasks and decide to head to the gym before going home. Yes, you finish one of the typical days of an Associate.

To sum up, the work is a mix of gathering data, calls and meetings,  model reviews, presentations, and a bit of sourcing. It’s interesting to be a Private Equity Associate, isn’t it?

2. Typical Roadmaps to become a Private Equity Associate?

2.1 From Investment Banking to Private Equity

For an overview of chance to get into Private Equity across career path and background, please visit our Wall Street Career Planning tool 

This is the most common track to move up your career ladder. After 2-3 years in Investment Banking, you can apply for the Associate position in Private Equity.

However, beware when talking about Associates in Private Equity, there are 2 types of Associates: Private Equity Associate and Senior Private Equity Associate. The Job Description might be similar but there are some differences:

Position Private Equity Associate Private Equity Senior Associate
Responsibility Although Associates also deal with external parties, they focus more on deal sourcing, conducting due diligence, and running financial models. Associates can assist monitoring portfolio companies, fundraising and looking for exit options.

Senior Associates act more like the firm representatives in front of companies that look for investment. They also involve more in portfolio company’s operation.

Age 24 – 28 26 – 32
Education Pre-MBA Post – MBA
Working Hour 60 – 70 hours 60 – 70 hours
Salary & Bonus $150K – $300K $250K – $400K

 

2.2 From Private Equity Analyst to Private Equity Associate

Recently, this track started to become more popular. After college, you can apply for an Analyst role in this industry instead of the role in Investment Banking then after 2 years, you can apply for an Associate role as a Pre-MBA. 

The reason why it becomes popular is that fresh graduates have the opportunity to work as the buy-sides to understand the industry and gain experience so they can get closer to the Associate easier.

Comparison between Analyst and Associate:
Similarity:

The Job Descriptions of Analyst and Associate have several similar aspects such as dealing, reviewing potential investments and reviewing contracts, monitoring companies’ portfolios, and assisting with fundraising activities. They also work on financial modeling, coordinating the due diligence process including work with lawyers, auditors, and the other parties to get the insights.

Difference:

The exact differences between Private Equity Associates and Analysts heavily depends on the firm size. In some small PE firms with a flat organization structure, Associates and Analysts could perform the same jobs. However, in Upper Middle Market and Mega funds, Associates and Analysts will perform different scope of work.

Category Private Equity Associate Private Equity Analyst 
Job Description

In overall, Associate will lead different workstreams: from running financial models, due diligence, sourcing new deals, monitoring performance, to looking for exit options. Associate will delegate work to Analysts and supervise the output. 

Besides that, Associates also assist Partners/Principals in fundraising activities if asked.

  • Run simple financial model on prospects
  • Gather data, research about the industry of target companies
  • Assist Associate to run more complicated financial models when the deal progresses. 
  • Admin work, such as setting up meetings/call with portfolio companies
Age

24 – 28

 22 – 25

Education Pre-MBA with 2-3 years experience in IB or as an PE Analyst Underground

 

2.3 Recruiting process

There are 2 types of recruiting processes: The on-cycle process and Off-cycle process. We layout the timeline of those two processes below, from networking to on-boarding period, for your reference. 

Private Equity Recruitment timeline

  • HH = Headhunters

  • Upon completing the SA 2020 internship recruitment process, qualified interns will receive full-time offers starting working in summer 2022. 

  • Private Equity firms Analysts are recruited from 2 sources: (1) current interns who performed well in their summer internships and (2) fresh graduates who apply via Full-time Analyst program.

  • About the Summer Internship program for MBA students, this is the timeline for the 15-month or 18 month MBA program. For 1-year MBA programs, either the timeline is the same or recruitment happens in Jan-Feb and the internship starts in Jun – Jul same year.

We understand that the table contains a lot of information, which can be too overwhelming for any newcomers. Hence, here is an example of the Associate On-cycle recruitment from this timeline:

Headhunters start approaching IB Analysts around July – August 2020, then the whole interview process will run from August to October 2020 across firms. Successful candidates will receive the offer. However, those candidates only start their jobs around August – September 2022. This process will be replicated every year, meaning that if you got a PE Associate offer in 2021, you will start your job in 2023.

2.3.1 On-cycle recruitment process:

  • Target:

The on-cycle process mostly targets Analysts at Bulge Bracket and Elite Boutique Banks for Associate positions at Mega-funds and Upper Middle Market funds. However, as the industry keeps growing, PE firms now also organize on cycle recruitment for Summer Analyst Program (i.e: internship) and Full-time Analyst Program. 

  • Process: 

For Associate positions, the process can start as early as July to October, only a couple of months after Analysts at Bulge Bracket or Elite Boutique Banks start their jobs.  If you finish the process and you get the job offer, you can only start in the next 1.5 – 2 years. For example, if you get the offer in 2021, you will only start your PE career in 2023.

The headhunters have more power on the Associate On-cycle recruitment process compared to Off-cycle. After getting your CVs, the headhunters will contact you and set up a telephone interview. Some common questions in this interview could be: “Walk me through your resume?”, “Why Private Equity?”, “Why this firm?”, etc. If you can impress the headhunter, they will pass your CV to the firms. Hence, headhunters decide whether you can go to the next round. You would better show up well prepared and win them in the telephone interview. 

The PE firm will invite you to “a weekend event”, in which the most nightmare part of On-cycle recruitment happens. You will have four to five 30-minute interview sessions with people across levels in that firm. If you can pass, the firms will call you for an LBO model test. Finally, you will have the result on Monday.  

We also list down common asked questions in a PE interview in section 5: Prepare for the interview. You can visit there to prepare yourself ahead.   

2.3.2 Off-cycle recruitment process:

  • Target

The Off-cycle process is applied for below situations:

  1. Middle Market funds recruiting Associate positions, 
  2. Positions in non-US markets,
  3. Positions for non-experience in Investment Banks 

Among those 3, Middle market firm recruitment is the most common case. Therefore, we will focus on the process of (1). The requirement, timeline and process of (2) and (3) will depend on which exact position the firm is recruiting

  • Process: 

The process of recruiting will start after the On-cycle process, from December to February. Successful candidates in this track will start 1.5 – 2 years later, the same timeline as On-cycle successful candidates. 

However, if you apply for any vacancy that firms need immediately, you can start instantly. Those recruitment timelines are more random throughout the year. 

The off-cycle recruiting process usually lasts longer, in which recruiters want to assess your “fit” and critical thinking abilities on deeper levels and they also require more thought and preparation of a real investment thesis. 

Headhunters have little power here but you can still try to reach out to them and check if there is any vacancy.

2.3.3 Summary of the key differences

  On-cycle

Off-cycle

Recruiters

Mega Funds and Upper Middle Market Funds

Mostly Lower Middle Market funds. Mega Funds and Upper Middle Market funds still can recruit if there are available slots

Target Candidates 

Analysts in Bulge Bracket and Elite Boutique Banks

Analysts at smaller firms/banks

People who do not work in banks 

Roles not in the NYC

When? The process will start in August or September The process will start around December or January
Timespan

Days to weeks 

Starts and ends very quickly

Usually months
Interview A paper LBO or a two-three hour LBO is more common in On-cycle recruitment. Focuses on the in-depth thought process; therefore, taking-home LBO model and presentation is often applied

2.4 Resume

Before writing your resume, think carefully about what will make your resume deal-oriented – in the below table, we score all the relevant experiences so that you can have a direction for your resume

Score Relevant work experience – For pre-MBA Associate
5 An analyst at Bulge Brackets or Elite Boutique Banks
4

An analyst at Middle-Market & Boutique Banks

An analyst at a Middle-Market Private Equity firm

3 An experienced candidate at Big4, Valuation firms, and Risk Management
2 An internship at Wealth Management or Boutique Financial service firms
1 Relevant finance experience including: student-run funds, finance and business clubs

If you can score 4 or 5, it means that you have a preferred experience for Private Equity. But what if you only get 1-3? Definitely, there will be more work to do with your resume but we will share how to twist that. 

  • Step 1: Take a look at the current job description of Analyst/Associate/Senior Associate and pick the keyword when your target firm describes that position. 

Example 1

Both job description and actual work of PE’s Analyst and pre-MBA Associate are related to Investment Deal. Therefore, the key theme of the resume should be your Achievements/Involvement in Deal transactions, emphasizing on Due diligence, Financial Modeling or Market Valuation. 

Example 2: 

If you apply for Senior Associate positions, Deal experience is important but experience in managing companies, restructuring organizations, etc should be highlighted also because Senior Associates probably involve more in portfolio companies’ operation and management. 

  • Step 2: Select your achievements/involvements that you can read 

There are some ground rules that you should follow here

  1. You should choose 2-4 achievements under each position. Do not put only 1 achievement as it will raise the concern that you did not achieve much. There is one exception here: IB Analysts who have just started their jobs in the last 2-3 months.
  2. Change any relevant word into “deal”, if possible. People who scored 1-3 in the table above often slip this rule but this principal can help them have a more PE-driven resume.  
  3. In each achievement, remember to put the size of that deal, type of that deal, and your action/involvement.
  4. The order of deal size, deal type and your involvement should be consistent across bullet points. We often recommend this order [Your action/responsibility][Deal size][Dealtype]. Consistency will help the hiring team catch up all the information quickly. 
  5. Start your point with an action verb to get the attention and clearly express what you did 

Those rules will be beneficial also for anyone who owns a strongly related experience to private equity. 

2.5 Prepare for the interview

The interview process will include multiple rounds. Normally, Analysts and Associates will have 2-3 interview rounds; some firms even organize 4-5 interview rounds. Internship recruitment can be less heavy: only 1-2 interview rounds. 

First interview round is to screen the candidate profile by asking some fit/behavioural questions, such as Why PE? Why this firm? etc. For Associate recruitment, it will be conducted by headhunters via phone. For Analyst and Intern, it will be conducted by the PE’s hiring team. 

Other interview rounds will be conducted in-person and will skew towards technical questions, case study, deal experience, etc

2.5.1 What do recruiters evaluate?

Private Equity firms will evaluate your skills, your technical knowledge, and why you are interested in PE and investment deals. Many questions are designed to test these competences. Simply put, interview questions will be belong to 6 main categories:

Fit/Background

(1) Why private equity associates? 

(2) Why the firm? 

(3) Are you comfortable with financial modeling?

(4) Are you a good team worker? 

Technical Questions

Accounting (1)

Valuation (2)

Growth/profitability driver models (3)

Quick IRR math questions (4)

 

Deal/Client Experience

(1) Evaluate the growth of a deal 

(2) Tell me about one of deal experience

Firm Knowledge

What is the firm’s current portfolio? (1)

Tell me about the firm’s previous strategies and exits (2)

What do you know about the firm’s investment thesis? (3)

Which companies do you think are the best and the worst (4) in the portfolio? 

If you had been able to do something different, what (5) would have you done?

Industry Discussion

(1) What are the major companies in this industry? 

(2) Which top company will you invest in? 

(3) What are the company’s growth drivers and risk factors? 

(4) What is that company’s outlook in five/ten years

Case study

Solve cases involved in 3-statement models with a focus (1) on the revenue and expense drivers 

A take-home LBO model and presentation (2)

A three-hour LBO modeling test (3)

A simple paper LBO (4)

2.5.2 How to prepare and ace an interview

#1. For fit/behavior questions, this is the part where you tell your stories with interviewers. Thanks to these questions, recruiters will learn how your previous academic and work experience fits into the private equity and also strategies of the firm you apply for.  

The questions in the first place always surround:

  • Introduce a little bit about yourself  / Walk me through your resume
  • Some of your strengths, weaknesses
  • Your achievements and failures
  • Future plan and why Private Equity?

What you should prepare here are crafting your own stories (reflecting your achievements, past experience, transferable skills and leaderships), and backing up small personal stories to answer questions related to strengths and weaknesses. 

If you have some disadvantages in your profile such as low GPA, non-target background, fewer outstanding accomplishments, fewer finance internships, and etc., you have to prepare stronger responses to make up for these “real weaknesses”. 

#2. For technical questions, what you will be interviewed always sticks with accounting, finance, valuations, and practical deals. 

  • Accounting: Financial statements (types of financial statements, links between different types of financial statements), revenues, operating costs, EBITDA, debt & equity, etc.
  • Finance: Equity Investments (stocks), Fixed Income Investments (government bonds, corporate bonds, commodities, currencies) , Derivative Investments (options, futures, forwards, swap), etc.
  • Valuation: Valuation metrics and multiples,  (Discounted Cash Flow, LBO modelling, etc.), knowledge about mergers and acquisitions, etc.

#3. Other non- technical questions: Beyond technical comprehension, private equity firms also want to test your knowledge about the market, practical deals and companies. Your work is to keep abreast of news about markets, imminent IPO, bond issuances, and mergers & acquisitions on a daily basis. They can also ask your opinion about the firm’s portfolio and what you will do accordingly. The questions largely depend on your experience on your profile. That means if you present your active involvement in transactions/deals, you might get many questions about it. Discussing the deals is considered the most challenging part in an interview. 

3. Top Global Private Equity firms

Research the firms in this industry as much as you can to make your way to become the Associate easier. Below are top 4 famous firms in Private Equity that you should pay attention to.

3.1 The Blackstone Group Inc

The Blackstone Group

Blackstone was founded in 1985, its headquarters are in New York. The company has a broad rage of investment sectors, including energy, retail, and technology. Blackstone’s assets under management (AUM) is $571 billion while its private equity unit has $98 billion in AUM.

3.2 Neuberger Berman Group LLC

NEUBERGER BERMAN GROUP LLC LOGO

Founded in 1939, Neuberger Berman Group LLC has $356 billion in total AUM. The strength of Neuberger Berman is the alternative investments which rise to $98 billion. With more than 30 years of experience in alternative investments, Neuberger Berman employs more than 160 professionals in the field in seven locations worldwide.

3.3 Apollo Global Management Inc

Apollo_Management_201x_logo.svgApollo was founded in 1990 and its headquarters is in New York. It has $331 billion in total AUM and its private equity unit has $77 billion in AUM. Private equity has been a cornerstone of Apollo’s business since its founding in 1990. It has owned more than 150 companies across sectors including financial services; business services; consumer services; chemicals; natural resources; consumer and retail; leisure; manufacturing and industrial; and media, telecom and technology.

3.4. The Carlyle Group Inc

The_Carlyle_Group_logo.svg

The Carlyle Group Inc. (CG) was founded in 1987 and is headquartered in Washington, DC. Among the total AUM of $224 billion, The Carlyle Group’s private equity unit has AUM of $86 billion. The company employs over 1,775 professionals worldwide and operates through 32 offices located in North America, South America, Europe, Africa, the Middle East, Asia, and Australia.

4. Why Private Equity?

Compared to Investment Banking, Private Equity is more interesting to work for. It is not all about buying and selling companies, you also have to manage and improve the operation of the companies. The bonus in Private Equity is more variable because you will receive both bonus from your performance and the percentage of investment returns. Getting to Private Equity is difficult, besides graduating from top university or being top employees in Investment Banks, you also need to have relevant experience such as working on deals. However, it’s worth a try, the more you prepare, the higher chance you have to get into Private Equity.

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