Becoming a private equity expert | Allensbach University

Private equity is one of the most profitable branches of the financial sector. If you can imagine working in this highly interesting field of activity, our "Master of Finance" the right thing for you: We familiarize you with the basics of the Private Equity familiarize you with Expert knowledgethat you can put to good use in your future career.

What is private equity?

Private equity" refers to capital from private investors that is invested in companies that are not listed on the stock exchange. It is therefore also referred to as Off-market equity. The investment is usually made by injecting equity or mezzanine capital. The latter is a type of financing which, in its economic and legal form, is a hybrid of debt and equity.

Through his participation, the investor acquires for a limited period of time Company shares. In this way, they can generate a profit. In order to make the return as attractive as possible, private equity companies are always on the lookout for companies with a good risk/return ratio. The most important selection criterion is a Stable and high cash flow represents. If a private equity company invests its own capital in a start-up company, this is also referred to as Venture Capital (risk capital). In this case, the investment is characterized by a higher risk/return.

How to get started in the private equity business

In Germany, working for a private equity company is considered The pinnacle of a financial career. However, it should not be overlooked that employers generally require several years of experience in investment banking - particularly in the areas of corporate finance and M&A (mergers & acquisitions). Some young professionals only go into investment banking in order to switch to private equity after a few years.

Good knowledge of data processing and analysis is also required, outstanding academic achievements and excellent presentation skills. Key search criteria include technical skills such as a good team fit and excellent modeling skills. Applicants are expected to be able to handle complex discounted cash flows, refinancing and leveraged buyouts. Private equity employers also like to see young investment bankers who have not only gained experience with the sell-side, but also with advising buyers (the so-called buy-side). Entrepreneurial and strategic thinking are also essential prerequisites for a successful entry into the private equity sector.

Applicants with a Master of Finance degree have an advantage

While American investment banks also accept graduates with a bachelor's degree, German private equity employers are increasingly looking for women and men with a bachelor's degree. Master of Finance degree. Those with a good degree and a specialization in corporate finance have excellent prospects of starting their career quickly. As the local private equity companies primarily invest in Germany, Austria and Switzerland, applicants should have a good knowledge of the economy in these countries. Fluency in English and a sound knowledge of one of the employer's target sectors round off the professional profile of job applicants.

In terms of salary, applicants from the investment banking sector have to accept slight losses. However, bonuses can be higher. There are also profit-sharing payments, known as "carried interest", which flow after the successful sale of a portfolio company. It can take several years before such interests are paid out. Then, however, private equity specialists can easily make it to 100,000 euros per year bring. In order to avoid disappointment, newcomers are advised to take a close look at the company of their choice and take a close look at the private equity company's approach and strategy.