After the MBA: How to Break Into Private Equity

It’s notoriously difficult to get a foothold in the cloistered private equity world, but with a dedicated career track and well-researched options, MBA graduates can be well on their way to a job in the sector.

When Abel Osorio graduated from Wharton Business School in 2012, he’d already had a few years of private equity experience under his belt.

As an associate at H.I.G. Capital, a large-cap buyout firm based in Miami, he’d worked on their lower middle market buyout fund for a couple of years, doing mostly modeling and analytics. That experience was indispensible in landing a position as vice president at Battery Ventures shortly after graduating from Wharton.

“For post-MBA, it’s incredibly difficult to break in if you don’t have prior private equity experience,” says Osorio, who went on to found his own firm Monserrat Capital after his time at Battery, and is now a principal at New York-based Turnspire Capital.

Osorio’s path is actually the most archetypal for those seeking to enter the sector: after graduating from college, he worked for two years at Thomas Weisel Partners, an investment bank, before joining H.I.G.

Rob Morris, founder of Olympus Partners, confirms that this is the easiest way to break into the industry: two years of investment banking, two years as an associate at a private equity firm, then an MBA.

“Firms look first and foremost for students with prior PE experience, creating a bit of a chicken and egg problem,” says Steve Kaplan, a professor of entrepreneurship and finance at Chicago Booth School of Business. “If you do not have PE experience before b-school, it is very hard to get in right away.”

Private equity hiring practices: Pre-MBA vs. post-MBA

Private equity hiring practices differ fairly drastically for pre-MBA versus post-MBA. For pre-MBA, a highly structured recruitment process begins quite soon after the candidate has entered the banking job. While the process is more standardized, since it’s generally run by headhunting firms, there’s also a greater availability of positions at this stage than post-MBA.

“It’s a simple pyramid, really—PE firms need a lot of associates to do the grunt work, but you don’t need as many VPs,” Osorio says. “That’s why when you’re in banking, you don’t need to network much; you get calls from headhunters, you’re in demand. But when you’re in b-school, you have to do a lot of networking to find the right fit, which requires meeting a lot of firms and people.”

Since there are simply fewer positions for post-MBA candidates, those who have prior experience are clearly given priority—although Osorio notes that even then, it can be tough to land a job.

Although an MBA from a second- or third-tier business school certainly doesn’t disqualify you from a position at a private equity firm, the top-tier names do hold sway. If the candidate doesn’t have an MBA from Harvard, Wharton, Columbia, or Stanford, it could be difficult to break in since competition is so fierce. Large-cap firms—The Blackstone Group, Kohlberg Kravis Roberts, TPG Capital—will likely have more stringent requirements, while mid- and lower-cap firms could look beyond the top-tier business schools when scouting for candidates.

[See the Top 10 business schools for a career in private equity]

Most business schools don’t prepare you for a career in private equity—there are few, if any MBA specializations specifically in private equity—although some have begun initiatives; Chicago Booth, for instance, started a PE lab in which roughly 100 students do internships for course credit with a private equity or venture capital firm. Kaplan notes that some students have turned these internships into full-time jobs.

The program also holds investment challenges that push students to put together investment theses that could be worked on with local private equity firms. Booth holds close relationships with investors like Hyde Park Angels; every year, several students work as associates at the firm.

Private equity hiring trends

Kaplan says that the one change he does see in private equity hiring practices is that more firms are willing to look at students who bring consulting or operating skills that could be used to add value to portfolio companies. Candidates with said experience could be better off targeting firms known for hiring consultants—Golden Gate Capital, for instance, which often hires from Bain. KKR has also done so, and is closely linked to the consulting industry with its own consulting arm called Capstone.

Morris backs this view: “Other ways include work your way up in opportunities in industries on which PE focuses, as PE is often looking for operating folks on team.”

For those on an MBA path, some introspection always helps. Osorio says he knew he didn’t want to be a banker forever; it was just a matter of deciding whether to go into the public markets, or private, since they typically recruit for a particular asset class.

“You weigh in what you like, what your personality is, where you excel,” he says. “And I knew I wanted to move to the buy side; PE was ultimately better suited for me.”

And as with most things in the private equity world, the job market also depends a lot on fundraising cycles. A good pace of fundraising, or a freshly closed fund will likely call for more personnel hires ready to work on the new batch of deals.

“PE firms have been successful in fundraising in the last two years,” says Kaplan. “Accordingly, the job market is relatively good (albeit still very hard) for PE."

Private equity glossary

Cap: short for ‘capitalization.’ Refers to a company’s size. For instance:

  • Small Cap Buyout: the purchase of a company that is valued at less than $350 million
  • Mid Cap Buyout: the purchase of a company that is valued between $350 million to $1 billion
  • Large Cap Buyout: the purchase of a company that is valued between between $1 billion to $3.5 billion

Leveraged Buyout: the purchase of a company or a business unit of a company

by an private equity investor using mostly borrowed capital

Limited partner (LP): an investor in a limited partnership that funds a private equity firm’s business deals.

Middle market firm: a company whose annual revenues fall between those of small and large companies. Upper and lower ranges for this category of firm can range, but are generally considered to be between $10 million and $1 billion.

Image: Maik M./CC BY-SA 2.0

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