What Is The Role of Private Equity Professional?

If you have been following private equity industry religiously, you would know what the day-to-day chores of a private equity professional entails…

Or do you?

It doesn’t matter whether or not you know what is the role of private equity professional, unless you are planning to become one yourself.

And in that case, let’s reprise the roles of a PE professional.

Roles of a PE professional are segregated into three main categories…

  1. Raising money
  2. Investments: Sourcing, making and managing
  3. Selling off companies

Apart from buying and selling companies, it is interested to note that a role of a private equity professional is divided into above-mentioned three categories

And if you look at these roles in detail you would know what does a private equity professional do on a daily basis…

  1. Raising money: While fundraising is generally done by the senior members, at times there is a dedicated fundraising team who would be working within the large sum of money. Basically, in every four or five years, the senior management at a private equity firm, visits international investors and high net worth individuals so as to raise money for the next fund. This is an ongoing cycle – as the funds in hand have been invested in organizations, the senior management again come on the road for fresh money to be invested.
  2. Investments – sourcing, making and managing them: Investments is what private equity firms are known for and do best. But there is a lot involved behind the scenes…

There are three parts to investment – sourcing, making and managing.

Sourcing part – that is finding investments is usually taken care by mid to senior management. It involves seeking potential targets and then reaching out to those organization’s management team. This could be done either directly or through a middleman (like an investment bank). Since PE firms have specialization in various sectors/or regions – the dedicated team has quite a strong knowledge of potential targets.

Making investments is a process of acquiring a company. And is a responsibility of a junior team, of course under the supervision of seniors. The process involves lots of steps post which senior partners decide whether to accept or reject the investment.

Managing investments is a process in which the companies acquired are managed for a year or two before it is sold off. While private equity professionals may not be involved on a daily running of organizations they bought, however, they would be involved in important strategic decisions.

  1. Selling off companies: The money is generated only when a company is sold at a profit of course. Note that investments are generally kept for three to five years, post that they are sold. The sale of companies could be through any method – by selling to another company, to another private equity firm or via an IPO on the stock market. And the entire process is managed by junior team under the expert guidance of senior management.

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