Why investment bankers want to work in private equity (2024)

FAQs

Why investment bankers want to work in private equity? ›

Second, you can say that you want to work in private equity because you'll gain much more exposure to the deal process. You'll learn significantly more by being at the frontline of the due diligence work. Third, you can say that you want to be actively involved with post-investment operational work.

Long-term focus: Investment banking is known for its fast pace and short-term focus. Private equity, on the other hand, has a long-term focus and allows investment bankers to be more strategic in their thinking.

Another advantage of working in private equity is the exposure to a wide range of industries and companies . Private equity firms invest in various industries and often work with companies at different stages of growth , providing a diverse and dynamic work experience .

Private equity firms are investment businesses comprising investors who use their capital to invest in private businesses. Those working in private equity can often achieve a higher salary, but their income may be less stable than those working in investment banking.

Private equity firms can work with investment banks to take publicly traded companies private (i.e., leveraged buyout) and acquire private businesses from venture capital firms and other owners. A private equity firm may also focus on other business interests, for example, as a real estate investor.

As for hours, both private equity and investment banking can be demanding careers. However, investment bankers tend to work longer hours, often working late into the night and on weekends. Private equity firms also tend to have a more relaxed work environment and offer more flexible hours.

The private equity market has grown substantially, and as of 2021, private equity firms manage roughly 20% of U.S. businesses. Private equity firms can access large amounts of capital, which is attractive to business owners, especially as bank loans are becoming harder to access.

Second, you can say that you want to work in private equity because you'll gain much more exposure to the deal process. You'll learn significantly more by being at the frontline of the due diligence work. Third, you can say that you want to be actively involved with post-investment operational work.

Landing a career in private equity is very difficult because there are few jobs on the market in this profession and so it can be very competitive. Coming into private equity with no experience is impossible, so finding an internship or having previous experience in a related field is highly recommended.

Private equity owners make money by buying companies they think have value and can be improved. They improve the company or break it up and sell its parts, which can generate even more profits.

What pays better, IB or PE? ›

Analysts at all types of private equity firms earn significantly less than Associates, just as Analysts in IB earn significantly less than Associates. In fact, PE Analysts often earn less than IB Analysts! So, you might initially make less money if you start in private equity.

The corporate culture of private equity firms is usually more relaxed and less stressful when compared to investment banking. PE specialists usually work 40–70 hours per week and have a more flexible schedule.

Some associates seek roles in private equity rather than continuing down the investment banking path because the skills are transferable and private equity can offer new and exciting opportunities.

Investment bankers who are looking to move into private equity will need to demonstrate their understanding of financial analysis and modeling, as well as their ability to identify and assess potential investment opportunities.

Entry Point: Associate Role (Pre-MBA)

While analyst roles are getting more popular in recent years, the associate level is where most people start their PE career. Instead of jumping straight into PE from college, they go through a few years of investment banking or management consulting first, then switch into PE.

You might say you want get into private equity because you're interested in investing and going deeper into finance. That's fine. But the answer would be much better if you could mention that you want to learn more about investing because you've loved it since college when you part of your school's investment club.

Private equity offers a more attractive work/life balance but is also potentially even harder to break into. Like investment banking, PE also offers opportunities to move into asset management, hedge funds, venture capital, or other senior roles in finance.

Examples of solid answers to the “why private equity” question: You want to work with companies over the long-term instead of just on a single deal. You want to get exposed to the operations of companies and understand all aspects rather than just the financial ones (note: “exposed to,” not “control” or “improve”).

Private equity investors work with portfolio companies over the long-run, often 5-8 years. Hedge funds investments can be as short as a few weeks. So private equity teaches you the art of long-term view. Private equity also gives you the ability to work closely with the company over an extended period of time.