If you prefer a smaller, more relaxed firm, slightly different from the Wal Street investment banks depicted in countless movies and television shows as particularly grueling, then the buy side might be for you. Though similar to investment banking, private equity offers finance professionals a unique experience that differs somewhat from the sell side, yet one that is certainly still rewarding.
Private equity firms are generally smaller than investment banking institutions, and working on the buy side reflects that. Fewer employees, more of a focus on culture and a better work-life balance are a few of the advantages that private equity firms hold over their investment banking counterparts. Taking culture out of the equation for a moment, the big difference between the buy and sell sides is who is purchasing business interests. Private equity firms, as evidenced by their position on the buy side, purchase interests, while investment banks sell them.
Private equity associates purchase business interests on behalf of investors who have already put up the money for the transaction. Sometimes firms will purchase controlling stakes, and subsequently make management decisions as well.
If this sort of lifestyle seems to be a good fit for you, you may want to look into private equity jobs. However, breaking into the buy side is slightly different than it is for the sell side. Though similar, firms on both sides aren't exactly the same, and private equity companies will be looking for different things than investment banks. Because of their small size, private equity firms will be tough to find employment with, and you should be sure you have exactly what they are looking for.
Educating yourself for life on the buy side
A bachelor's degree is typically an important first step toward finding work at a private equity firm – however, it is by no means the only step. A degree in areas such as finance, accounting, statistics, mathematics or economics will be most helpful. However, private equity firms are small, and thus, look for the right kind of people to fill the gaps. Just because you graduated with an impressive GPA and a degree in finance, does not mean you qualify. Even with an MBA, it will be tough to get a private equity job without any work experience.
"The required experience typically comes from the sell side."
With all the education in the world, you'll still need real world experience to get your foot in the door at a private equity firm. These companies do not typically hire candidates out of college, and will often require between two and three years of work experience for even entry-level jobs. Where does this experience typically come from? The sell side.
From the sell side to the buy side: The final step
Yes, if you want to work at a private equity firm, the best thing to do is try your hand at investment banking for a couple years, at least. This sort of experience will teach you all you need to know to be successful on the buy side. Once you have this under your belt, you can then transition from an investment bank to a private equity firm, and land yourself a job as an associate. At the start you will be thrown into deals, from beginning to end, and be expected to contribute immediately. From there, you can begin working your way up through the firm.
Private equity hiring managers are picky, and will look for something with the right education, plenty of experience and the sort of personality that fits into the firm perfectly. But before starting your search for the perfect buy-side position, make sure you understand the sell-side enough to land the job.