Securing a position in a private equity-backed business offers a great opportunity to participate in a life-changing equity event. It is no surprise that roles in private equity are sought after, and seizing an opportunity in this space can seem like a leap into the unknown.

At Blair West, there is one overriding question which we hear from frustrated candidates who may have been overlooked for private equity-backed opportunities in the past…

 

How are private equity-backed environments different?

 

Frustratingly, the answer is often there’s nothing necessarily unique about operating in a private equity-backed business, and many of the environmental factors can indeed be found in other businesses. It all depends on what you consider the norm in terms of pace, energy and work/life balance.

Having said that, there are some factors of private equity portfolio companies which can be identified as typical and these can be useful to consider if this is the space you’re aspiring towards.

 

Ok, so what are the factors that characterise private equity?

 

Sky-high expectations

 

For any business to generate interest from a private equity firm in the first place, there must be potential for rapid growth and a sense of collective aspiration.

PE firms and private equity investment bankers typically work on a principle of doubling their initial investment within three years so, in its nature, the environment of a portfolio company for any new recruit will invariably be fast-paced, dynamic and relentless.

 

No excuses

 

The private equity model works because it’s executed by smart, analytical, diligent senior people who invariably have a huge hunger and capacity for work.

Expectations are that budgets are hit, actions implemented, good quality information is readily available, board room discussion maintained at a high intellectual level and big decisions are made swiftly.

Successful executives need to match this focus.  

 

Technical excellence

 

Private equity environments require executives to have strong technical knowledge. These are just some of key areas of expertise which would be valued in a recruitment process:

• understanding deal structures
• how returns are derived
• reporting requirements
• bank funding
• deal processes
• due diligence

Even aspects of previous roles which may have seemed challenging at the time can have demonstrable benefits going forward into a private equity backed business – if you’re willing to reflect and grow. If you’ve been part of the management team in a leveraged buyout or taken responsibility for debt financing this could be the edge which sets you apart from other candidates.

 

The old vs the new

 

Professionalising a business and building appropriate infrastructure whilst rapidly scaling is a challenge wrestled by many PE-backed boards.

You will inevitably be joining a team made up of ambitious newbies and experienced time-served originals. Driving the business forward without putting the old gadgie’s* nose out of joint and working alongside institutional investors can be a bumpy ride.

 

Exit this way

 

Finally, there’s a laser sharp focus value creation in preparation for exit and an understanding that actions and decisions are made with that goal in mind.

What drives value on exit?

This is always going to be a question high on private equity firms agendas.

Executives who ‘get it’ are always going to be valuable to the private companies and this value will inevitably be monetised as you get closer towards that illuminated door.

 

Got it. What’s my best route in?

 

Prior experience of private equity isn’t always essential, yet this does depend on the private equity firm, PE investors themselves, investee company and the stage in the investment cycle.

Timing your point of entry in relation to the PE deal always matters.

 

Scenario A – closing the deal

 

Suppose the private equity firm are lining up appointments prior to deal completion.

In that case, the experience of the management team is one of many factors that will be scrutinised by a discerning investment committee.

Coming in at a later stage, your value to the business is primarily in smoothing the exit route. A candidate who is experienced in working within the private equity model and already has a deal or two under their belt will demonstrate confidence at this stage which a private equity virgin may lack.

 

Scenario B – joining at an earlier stage

 

Do you have significant expertise within a specific sector?

Where private equity experience is not the primary factor, it is most commonly replaced by relevant sector or business model experience.

Tracking businesses in your sector that have already raised investment may present opportunities whereby your lack of private equity exposure is outweighed by relevant sector knowledge.

Private equity firms also become less stringent around private equity experience when a business has underperformed or is behind plan. Tracking such businesses might also present opportunities.

 

Scenario C – anticipating investment

 

Going back earlier in the timeline, perhaps the easiest and most common way to gain private equity experience is to already work for a business before it raises investment.

This puts you in a perfect position to show your drive to be part of the executive team at a time of dynamic change.

Therefore, focus your search on businesses which are currently some distance from private equity funding, but with a stated ambition to create an equity event. In this instance you’ll already be on the radar of the incoming PE firm.

 

Consider your pond

 

Although you may have thrived in high prestige public companies to date in your career, think about the potential benefits of being a bigger fish in a smaller pond.

The requirement for prior private equity experience will often be overlooked when a candidate moves from a more financially successful organisation and is therefore likely to “know what good looks like” or understand challenges in a later phase of growth.

A smaller business environment presents challenges of its own, so consider whether this is a compromise you would make to gain private equity exposure.

What candidate question do Blair West hear most from private equity firms?

 

As an executive search firm, the question we most commonly field when presenting a candidate with no prior private equity experience is, “do they get it?”. In this context, “it” invariably means the environmental factors implicit to the private equity investment model, the growth objectives and what the management team will expect in order to achieve them.

Candidates who push for a large basic salary over equity is a common red flag for many PE houses that they don’t “get it”.

Private equity investors crystallise their return on exit and want a management team aligned with them in driving toward that equity event and maximising value.

Trading part of a large corporate salary for an equity package in a PE-backed business can be challenging. Rightly or wrongly, to the PE investor, candidate reluctance is often interpreted as a lack of confidence in the growth and exit plan.

Make sure you do “get it” and present this clearly in your interactions. Research and understand the private equity landscape, key investors and PE-backed businesses in your market and gain as much exposure to the fundamental environmental factors as possible.

 

What should I do to get myself on the radar of Private Equity Firms?

 

 

Back yourself

 

Like most employers, PE firms respond to confidence. They are looking to deliver bold growth plans and want confident people to help deliver them.

Furthermore, private equity firms need a credible and impressive management team to lead the business into the next transaction – so confidence, impact and presentation are always important.

 

Get out there

 

Build your network with local and national private equity firms and advisors. Do an audit of interactions you’ve had previously in your career who could now be an ‘in’ to private equity or a relationship with private equity firms.

When moving on from roles and projects it’s always useful to leave the door on the sneck* in order to pick up with colleagues and clients positively in future. You never know who you might bump into at the next event you attend.

 

Actualise your ambition

 

Be bold about stating that you intend your next move to be into the private equity sector and are proactively networking to enable that.

Integrity and authenticity shine through even in relatively short, innocuous conversations. A five minute chat at the bar with an ex-colleague who now works in private equity could be your foot in the door to a rewarding and stimulating career move.

 

Blair West Glossary

 

*an older man, typically strong in his opinions

*on the latch, to open without the need for a key

Blair West can help you make your first move into Private Equity – please get in touch with us for more information or if this blog has generated questions or feedback.