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What Value Do I Have as a Private Equity Professional

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Typically, if a question is being asked about the daily responsibility of private equity professionals, this would be the answer, “buying and selling companies.” Getting into a private equity firm is not easy. But when it comes to job employment and big fat money, private equity firms hold a good reputation.

The value you add as a private equity professional

Essentially, there are four basic things for you to do on a daily basis: –

  1. Sell off portfolio companies at a profit.
  2. Raising money – you can raise money such as limited funds, endowments, and retirement funds from limited partners and insurance companies.
  3. Managed investments
  4. You need to source, diligence, and close certain deals to acquire companies.

 

  • Sell off portfolio companies at a profit

This is perhaps the end game for a private equity firm where it needs to exit their portfolio companies at a profit. The exit generally takes place within three to seven years after the original investment takes place. However, this does not necessarily mean the duration will take this many years, it all depends on the strategic circumstances.

Main sources of exit include: –

  • Growing revenue during the holding period
  • Cost-cutting
  • Selling the company at a considerably higher than the original acquisition
  • Paying debts that were used initially to fund the transaction

 

  • Raising money

This is normally carried out by senior partners in a private equity firm. Although, at a certain point in time there may be a designated team that works within the larger funds. This takes place every four to five years where the senior professional will go knocking door-to-door of international investors such as banks, insurance companies, pension funds or companies with high net worth individuals to help them raise money for their next fund.

  • Managed investments

When a company gets acquired, it needs to be managed until it gets sold off. This takes a couple of years’ time. However, a private equity professional is not involved in the day-to-day running of the company that they buy. But they need to keep a check on the performance and stay involved in making strategic decisions.

Other firms have specific teams who are responsible for managing these investments.

  • You need to source, diligence, and close certain deals to acquire companies

When these private equity firms analyze companies for acquisition, they need to take care of things such as what the company does, consider things such as the kind of industry the company is in, the role of the senior management, and the latest final performance of the company, and exit scenarios, etc.

A great amount of deal can come out successfully if the deal is made between a reputed partner firm or through professionals who reached out to potential clients through cold calls or investment banks that are representing the company.

Private equity qualifications include at least a bachelor’s degree in fields such as finance, statistics, mathematics, accounting, or economics.

A fact every private equity professional must know, most of the firms buy 100% ownership of companies in which they put in their entire investment. As a result, these companies will be in total control of the firm once the buyout is done.

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