What to know before you try to work in private equity.

Private equity is probably one of the most idealised corners of finance for students. Big deals, investments, portfolio companies, carried interest, responsibility as an investor. All true.

But to work out whether you actually want to do it, you have to start from the work, not from the prestige of the name.

The job is deciding where capital goes

A private equity fund raises capital from investors and uses it to acquire stakes in private companies or take public ones private, with strategies that differ from fund to fund.

The core principle is simple: buy an asset at a price that allows an attractive return, improve or grow that business, and then realise the investment.

Blackstone explicitly describes its private equity process as built on disciplined due diligence, risk measurement, identifying value catalysts and working with the management of portfolio companies to improve performance. That description is far more useful than “PE buys companies”.

What a junior actually does

At the start you spend a lot of time in the detail: market analysis, financial statements, valuation, LBO models, material from advisers and management, due diligence, investment committee documents, sensitivity analysis, debt, comparables, presentations.

The financial model matters, but it is not the point. The real question is whether the model tells a plausible economic story.

• Why should revenue grow?
• How much pricing power is there?
• Is the margin sustainable?
• How much capex does it need?
• How much debt can the business carry?
• What are the main downsides?
• Who could buy this company in five years?

You need to understand an LBO

For a PE interview, the leveraged buyout is fundamental. The basic logic is buying a company with a mix of equity and debt, letting the company’s cash flows service and repay that debt over time, and realising the investment later.

Returns to the equity investor come essentially from four drivers: EBITDA growth, margin improvement, deleveraging, and the difference between entry and exit multiple.

A good candidate also understands the opposite risk. If the company misses its business plan, if the debt becomes too heavy, or if the exit multiple compresses, leverage amplifies the downside exactly as it amplifies the upside.

Do you have to do investment banking first?

No. It is an extremely common route because banking teaches accounting, valuation, modelling, deal execution and how to run intense processes: all transferable. But it is not a universal rule.

Large alternative asset managers run programmes aimed directly at students. Blackstone, for example, lets eligible students apply to Summer Analyst and Associate positions, while KKR offers internship and full-time opportunities for students and graduate talent, including in the UK and Europe.

There are also entries from strategy consulting, transaction services, corporate development and other paths, depending on the fund’s strategy.

So the right question is not “do I need two years in a bank?”. It is “which path gives me the skills and the transactions the fund I want considers relevant?”

The most reliable answer comes from someone who already works at that fund.

A PE interview is not only technical

Being able to build an LBO is table stakes. The interesting part starts when somebody asks: “Would you buy this company?”

At that point you need an opinion. A good investment case covers business quality, market, competitive advantage, management, growth, cash conversion, risks, valuation, leverage and possible exits.

You also have to be able to say why you would not invest. That is where people who learned formulas separate from people starting to think like investors.

Does the CFA help?

It is not normally a universal requirement in private equity.

That said, the CFA Institute introducing a Level III pathway dedicated to private markets shows how important the sector has become inside buy-side education: the pathway covers due diligence, business planning, buyout valuation, private debt and the investment process from the GP’s point of view.

So it can be complementary training. But if you are preparing for PE recruiting, I would not use the CFA as a substitute for accounting, LBO modelling, investment thinking and knowledge of transactions.