Working in a Private Equity (PE) backed company can be an attractive and lucrative opportunity. The industry is massive, with over $13 trillion in assets under management as of June 2023 (McKinsey Global Private Markets Review), and falling interest rates should unlock pent-up deal flow and with it employment opportunities. But how do you land a job at one of these portfolio companies (portcos), and what does it take to be successful? This article focuses on roles within operating companies, not positions at the PE firm itself.
How to find roles
Don’t expect these positions to be broadly advertised. Instead, companies tap specialist headhunters and networks of experienced industry professionals. Use your connections to extend your network and get in front of these groups. This can be a lengthy process, so if you have any interest, start now. A common entry point is to become an adviser to the PE firm. As part of their early due diligence, the firm often recruits experts who can help them understand the target industry and make introductions. If you have this knowledge or connections, lead with that.
If you don’t yet have that deep industry experience, consider joining at a lower level. The equity upside will be less, but you’ll quickly gain experience and become a well-known entity. Turnover can run high at portcos, and senior roles often open and need to be filled quickly. You also may be tapped for a similar role in another portco.
How to position yourself
PE firms are looking for significant returns on their investments, which drives portco hiring decisions. The management team’s job is not just to implement the PE firm’s vision and hit the targets. They also need to effectively sell the value and upside of the portco a few years down the road during the next sales cycle.
The initial interview process itself is similar to most senior roles. Demonstrate drive, confidence and relevant expertise in both the role and industry. Ensure your stories demonstrate your ability to make and implement decisions that drive clear results. Also, seek to build a connection with everyone with whom you speak. Relationships matter in this industry.
Compensation expectations
Compensation will typically be significantly skewed to variable factors. Base salaries will be slightly below or competitive with similar roles at publicly traded companies. On-target annual bonuses may be significant, but aggressive goals could result in a lower-than-expected payout. The big carrot is the payoff if the next sale goes well. Return on the firm’s investment will be the primary driver in determining how much you see. Expect the firm’s partners to present some very enticing scenarios when they’re trying to get you to sign but remember that the investors get paid back before you do, and a low/no payout is a real possibility. Employment contracts can be complex, especially around equity grants and options, so consider hiring a lawyer who specializes in this field.
Also, leadership may ask you to make a substantial investment in the portfolio company (> $100K for C- level roles) when you join. The firm’s partners often have personal investments in your company, and they want to ensure you are similarly focused. Later, when the firm is sold off, you will probably be expected to reinvest if you’re going to stay with the company.
How to be successful
While PE firms talk about the benefits of having a longer-term outlook (i.e., not driven by quarterly reports), there is also a strong bias towards action. There will often be tough calls on restructuring, changing cultures and managing legacy employees. Develop a plan and be decisive. Also, while it is easy to get caught up in the day-to-day running of the portco, don’t neglect cultivating your relationships with key members of the PE firm. These can be invaluable when there are operational stumbles along the way.
If you’d like support in finding one of these roles or would like career coaching on how to be more successful in your current one, please reach out to the ACS team at alumnicareerservices@darden.virginia.edu.
