As the economy continues to recover after the 2008 economic downturn, the new framework for successful private equity firms is clearer than ever before.
The leaders of Bain’s private equity group wrote a significant article called “The New Rules of Private Equity Success,” where they discussed the “new normal” in private equity markets. The excesses of 2007 are not permissible in the current market environment. Private equity firms are protective of their capital in all their investments – including those made in their staff.
As The Wall Street Journal reports, private equity interviews are tougher than ever before. Some interviews are outright examinations that involve hours of financial modeling and presentations. Structuring deals is no longer enough. Senior staffers look for candidates who can improve operations at portfolio companies. Operations management and investment management are under one job description now.
How can the private equity professional succeed in the more competitive post-crash market environment?
Credentials
At a minimum, you are going to want your standard alphabet soup with an MBA and CFA. Summa cum laude also helps. Every single overachieving thing you have ever done should be on your resume – extracurricular activities, particularly sports. In the book “Getting A Job In Private Equity,” the authors said, “Sports terms are commonly used by private equity professionals, so you may find being familiar with them a useful asset going forward.”
Fortune magazine reported, “At night in the office, a senior guy would come out and yell ‘Stop working. Let’s arm wrestle.’ and people would start placing bets. . . . You’d get all these goofy competitive things going.’
Sports represent what private equity is all about: the combination of statistics and the intangibles in an atmosphere of ferocious competition.
Charisma
Can you close the deal? Can you sell yourself? Can you convince the firm that bypassing you would be the dumbest decision they ever made? While it is definitely possible to make the mistake of being arrogant, you must get as close to that line as you possibly can. There is truly no prize for second place. You can’t afford not to be the best. Focus on a private equity firm that specializes in niche industries, and dominate that industry.
Connections
Everyone understands this, but that doesn’t mean everyone can do it well. Yes, it helps to know powerful people. But more importantly, what can you do for them? How can you add value? It doesn’t matter if you know the President himself if you can’t add some value to make his life easier. Connections are a two-way street. Make sure your traffic is flowing both ways.
