Private Equity (PE) has a relatively new presence in Malaysia’s financial scene, and to those unfamiliar with the industry, it’s not uncommon to be confused with aspects between investment banking and private equity. However, the work involved is markedly different and as such, knowing the nuances between each industry can help you identify the right career path.
By definition, private equity is a form of capital that is not raised publicly; instead funds are pooled from a group of high net-worth individuals or institutions. PE firms then invest that capital into companies with unearthed potential — companies currently undervalued in the market.
Once under their portfolio, private equity firms generate value by optimizing operational and business practices within those companies. Compared to Investment Banks, PE firms have a deeper relationship with their companies that goes far beyond a deal.
As such, PE practitioners often have to monitor these companies on top of looking for new opportunities to invest in; applying essentially two very different skill sets. If you want to break into private equity, recruiters will likely look for whether you can bring value in terms of sourcing new deals for the firm as well as managing an existing portfolio.
Private equity can be further broken down into three types; the first, and most common form of PE, is Venture Capital. These firms invest in early-stage companies without a proven track record and such run a lot of risk in the promise of sizeable returns. The next type is Growth PE, which, as the name entails, is used to spur growth. The type of firms being invested in typically seek PE firms for their expertise in helping them expand their operations or access new markets. The final type is Late Stage PE, where PE firms usually buyout complete control of a company, allowing them to optimize business strategies (such as cost cutting) and drive certain synergies to improve profitability in the future.
So is private equity the right career path for you? There are many reasons people go into PE - but find one or two that best matches your experience:
You want to be an investor while working closely with different entrepreneurs.
You are very entrepreneurial and want to create value directly for a variety of different companies.
You don’t only want to work on deals for the sake of closing it--you are also interested in monitoring portfolio companies and seeing through the investment lifecycle.
This is a part of an ongoing series, where we interview with industry professionals to bring you insights into the industry. Stay tuned for our next article, which delves into the more technical aspects of private equity.