How to Break Into Private Equity

The private equity industry is booming, which is great news for anyone wondering how to get into private equity. 

Central banks injected liquidity and economic stimulus into the market during the COVID-19 pandemic, making the industry more competitive than ever. More and more startups and established businesses are taking advantage of higher valuations, and private equity firms have been expanding and dedicating more human resources to meet investor demand. 

But starting a career in private equity and navigating the landscape can be challenging for a newcomer. While a private equity analyst might enjoy a lucrative and rewarding long-term career, figuring out how to break into private equity can be tough.  

So, what does a private equity analyst do, and what’s required of a private equity analyst?  

Here’s an overview of how to get started in private equity.  

What Is Private Equity? 

Private equity is a type of investment in which the capital (equity) invested in a company isn’t publicly traded on a stock exchange.  

Private equity firms tend to be more hands-on with their portfolio investments than traditional investment firms and often take an active role in management and operations. 

The private equity industry has experienced significant growth in recent years. A study from Bain & Company found that 2021’s global buyout values exceeded $1.12 trillion – and nearly 31% of those deals were in emerging technology. 

Thanks to this growth, there’s been a huge increase in the number of private equity firms and the amount of capital they manage. And that means lucrative opportunities for skilled private equity analysts ready to direct the industry’s future. 

What Does a Private Equity Analyst Do? 

Learning how to become a private equity analyst begins by understanding the role. A private equity analyst is responsible for supporting a firm in its deal-making activities. This includes conducting financial analyses, modeling potential investments, and supporting due diligence efforts. A successful analyst must be able to think critically, work independently, and be comfortable with ambiguity. 

So, what does a private equity analyst do all day? The role of a private equity analyst can vary depending on the size of the firm and the stage of the investment process. But most analysts are involved in: 

  • Financial analysis: They conduct a comparative analysis of companies, construct financial models to support investment decisions, and perform sensitivity analyses. 
  • Modeling potential investments: They build pro forma financial statements to forecast a company’s performance under different scenarios and estimate the value of a potential investment. 
  • Sourcing potential deals: They identify and engage with potential deals that could enhance current portfolios. 
  • Supporting due diligence efforts: They coordinate with third-party service providers, conducting industry research and reviewing legal documents. 

How to Get Into Private Equity 

If you’re wondering how to get involved in private equity, let’s look at the education and experience generally required for the role. 

Get a Business, Finance, or Similar Degree 

Most private equity analysts have degrees in business, finance, or accounting. These degrees give you a strong foundation in essential business concepts and teach you about finance, marketing, and entrepreneurship. 

A finance degree offers in-depth financial analysis and investment banking knowledge, while an accounting degree builds a strong understanding of financial statement analysis and Generally Accepted Accounting Principles (GAAP). 

Learn the Industry and Necessary Skills  

A competitive private equity analyst should have strong Excel skills and be comfortable with financial models; you’ll build models to forecast a company’s future performance under different scenarios and assess an investment’s risk and potential return. 

Other skills firms are looking for when hiring private equity analysts include: 

  • Strong writing, communication, and presentation skills: Private equity firms value analysts who can clearly and concisely communicate their thoughts. This is especially helpful since many analysts present their findings to internal investment committees. 
  • Research skills: A successful analyst should be able to gather and synthesize information from various sources quickly. 
  • Experience in making persuasive arguments: Analysts usually begin their careers in sales or investment banking, learning to make persuasive pitches when contacting prospects for the first time. 
  • Future-facing technology knowledge: A skilled analyst should be comfortable working with new innovations, like emerging technologies that use alternative data in their sourcing

The Tools You Need to Become a Private Equity Analyst 

An analyst should be comfortable learning and adapting to new tools and technologies. Here’s an overview of some of the tools you need to become a private equity analyst: 

  • Excel: Private equity analysts use Excel to build financial models and analyze various data sets. You’ll need to know how to build more than a basic spreadsheet. 
  • Financial modeling software: Financial modeling software may help private equity analysts enhance the economic models that forecast a company’s future performance. 
  • Bloomberg Terminal: The Bloomberg Terminal provides real-time financial data, news, and analytics and is used by investment banks, hedge funds, and private equity firms worldwide. 
  • Deal-sourcing software: Deal-sourcing software lets analysts quickly find and track potential investments. Private equity firms increasingly use AI-powered deal-sourcing tools to identify and assess new investment opportunities. 

Companies like udu are developing technologies that help private equity analysts and firms more efficiently source opportunities, evaluate investments, and communicate with portfolio companies using AI and other innovative technologies. To gain a competitive edge in your job search, familiarize yourself with some of these new tools and technologies so you can help a firm implement them successfully. 

Leverage udu as a Private Equity Analyst

Becoming a private equity analyst can be competitive, but it’s possible to break into the industry with the right skills and experience.  

By researching target firms, perfecting your skills, and familiarizing yourself with the latest tools and technologies like udu, you can start a very successful career in private equity. 

As an AI-powered private equity sourcing and modeling platform, udu empowers you to:

  1. Quickly and easily find, track, and analyze potential investments.
  2. Source winning deals more effectively.
  3. Create unique search queries to find companies that match your investment criteria and track your favorites. 

udu is a powerful tool that any private equity analyst can learn to leverage. Knowing how to use udu for proprietary deal-sourcing could differentiate you from other applicants and fundamentally change your workplace’s efficiencies.

Already know how to get into private equity? Recently landed a new job and want to implement a new private equity tool? Schedule a demo today to learn more about how AI-powered private equity software can help you succeed in today’s competitive environment. 

Similar Posts