The private equity club and how to get in

Private equity funds are the kings of the capitalist system. With hundreds of millions, often billions of dollars to invest, they specialise in buying out large established companies, improving them, and selling them on.

People who work in private equity can make spectacular amounts of money. They also benefit from the kind of job security most investment bankers can only dream of. But don't count on finding a job in the industry easily.

Lucky few

'Private equity is one of the most popular career destinations at this point in time,' says Tim Butler, director of career development programmes at Harvard Business School. 'It is also one of the most competitive, if not the most competitive industries to get into.'

Guy Townsend, managing director of Walker Hamill, a London-based firm specialising in private equity recruitment across Europe, says most people haven't a hope in hell of making the move: 'You need a top class degree, from a top school. If you're coming from banking, you need to work for a top quality name, and you need to be ranked at the top of your peer group.'

If you fall into this narrow coterie, how can you maximise your chances of success? It all depends on where you're based. But on the whole, the message is the same for everyone: excel.

UK and US: Start young

The English speaking world has an advantage when it comes to finding work in private equity: US funds hire junior staff on an annual basis. Funds in the UK increasingly do the same.

There are two entry points:

• Two to three years into a first job after graduating from a first degree
• Immediately after an MBA

The first option is best but is no guarantee of a job for life. Funds typically hire on two year contracts and then send junior recruits to do an MBA (with no guarantee of being rehired). But if you delay moving into private equity until completion of an MBA, you risk being trumped by rivals who've worked in the industry already.

The Carlyle Group, the giant US fund with nearly $19 billion under management, hires 15-20 'associates' a year. Lori Sabet, senior vice president for human resources at Carlyle, said most come investment banking or strategy consulting.

If you're a banker, Sabet says you'll be well placed if you've worked in one of four areas:

• Corporate finance
• Financial sponsors
• Leveraged finance
• M&A

In the UK, people also move into private equity from accounting, but this is becoming less common. In 1997, 33% of junior staff placed by Walker Hamill had an accounting background; in 2003 it was 12%. In 2005, Townsend forecasts no more than 5% will be ACA qualified number crunchers.

The MBA springboard

If you plan to use an MBA course as a springboard to a private equity career, be sure to choose the right school. Blackstone Capital Partners, the US fund with $14 billion under management, presents to students at just three schools: Harvard, Wharton and Columbia. In Europe, you'll be well placed at London Business School or INSEAD.

Last year Columbia Business School sent 30 people into careers in private equity. Considering most funds hire no more than 10 people each, this was no mean feat.

Regina Resnick, head of the careers service at Columbia, points to the school's historic ties with the industry. It helps that big names, such as Henry Kravis, co-founder of Kohlberg Kravis Roberts, are alums and have been known to run roundtable discussions for students. 'Private equity funds like to build relationships with students before they hire,' says Resnick. 'It's a very personalized process - they are not hiring in great numbers and like to get to know people first.'

The implications are clear: if you're at the wrong school, your chances of making friends will be severely limited.

France: Grandes Écoles and a mixed profile

It is no surprise that schooling is also an important factor in moving into private equity in France. In the land of Grandes Écoles, anything less is likely to be trop petit.

Lionel Assant, a principal at Blackstone Capital Partners, a graduate of the prestigious École Polytechnique and a former director of Goldman Sachs Capital Partners, says the industry attracts the best candidates: 'The private equity industry is very popular right now. We have the choice of a lot of candidates with a wide variety of backgrounds. We are looking for well rounded individuals with great academic and business achievements'

Blackstone locates French staff in its London office, but other US funds, such as Carlyle, and European funds, such as Cinven, CVC Capital Parnters and Permira, have offices on the ground.

Barbara Valaperti, a Paris-based consultant at search firm Heidrick & Struggles, says most funds already have well established offices in France - job openings are rare. But some funds are occasionally willing to fill senior level gaps with outsiders. In this case, a mixed profile is popular: Valaperti says a little banking, a little strategy consulting, and a smattering of industry experience is a desirable combination.

Italy: Network to the top

If you want a job in private equity in Italy, it will help to have friends in high places. The Italian private equity market is small and recruitment is rare. 'Networking is the best way to get a job,' says Tracey Turton, a headhunter at Horton International in Milan. 'You need to get to know people and persuade them that hiring you is a good idea.'

International private equity funds such as Carlyle, VC Partners, Permira and Vestar Capital Partners, all have offices in Italy. But they don't employ many staff.

Take Vestar, which has just four people in Milan. Managing director Marco Mantica says the fund last hired in Italy in 2002. He plans to hire another junior in future, probably from an investment bank or strategy consultancy. 'They would need to speak several different languages and be at the top of their class,' he says.

Germany: Linguists required

Languages are also an asset if you want to move into private equity in Germany. 'You need to have had international exposure' says Jens Tonn, head of the German team at Candover. 'English is essential: there are very few independent German funds run by Germans.'

Candover is hiring an additional investment manager to the team in Germany. The fund has looked at CVs of investment bankers, employees of rival funds, and junior strategy consultants, but Tonn says finding the right mindset takes time.

'We need someone who can identify an investment situation, build a relationship with the management team, develop a plan, work through a sales process, and get debt financing in place,' he says. 'And that's just the early stages!'

sbutcher@efinancialcareers.com