At Business School placements, Private Equity (PE) share may be very small compared to consulting, investment banking or tech and most of the firms pick their recruits from only a few of the top schools. However, the very high salaries and other benefits attract quite a few of MBA graduates to seek positions in such firms.
Is an MBA really necessary in PE sector? Career advisers say that while it is not a basic qualification, career progression may require it. In fact, if you join a PE firm as a pre-MBA associate, your position would, at best, be only be that of a glorified analyst. Moving up the ranks, despite garnering requisite on the job experience may also be difficult.
So quite a few of the junior analysts prefer to take a break after a few years to enrol for an MBA and either return or join another firm in a senior position with a much better title, salary and perks. One way of gaining requisite job experience would be to join a private equity fund of funds or secondary PE fund and leave for acquiring an MBA after some years at work. They then would be able to join senior positions in a direct private equity firm.
In North America, PE firms have only 10.5% of the junior staff with 0-3 years experience. It climbs to 28% in the 3-5 years bracket, 41.2% for 5-7 years, 46.5% for 7-10 years and peaks at 46.6% for 10-15 years before dropping to 36.80% for 15 plus years.
Meanwhile, there is good news on the salary front during placements at B-schools. The median base salaries in PE stood at $170,000 at Stanford University’s Graduate School of Business in 2014. The 12% of the class selected for the sector received offers of a high of $225,000 and a low of $100,000. In addition, the median signing bonus was $40,000 and the median other guaranteed compensation $175,000 with a high of $300,000.
The “other compensation” usually translates into some portion of the firm’s carried interest, the portion of deal profits investors pay PE firms after a given fund’s companies have been sold. If all this is added up, the median first-year pay package stands at a whopping $385,000.
Harvard Business School saw 13% of the Class opting for positions in PE and LBO to gain median salary of $150,000, with median sign-on bonuses of $25,000 and median other guaranteed compensation of $80,000. This was the highest in any industry category.
PE firms also give pre-partner MBAs $300,000 to $1.75 million a year, while partners draw between $1 million and $10 million-plus in a year. The firms included TPG Capital, The Carlyle Group, The Blackstone Group, Kohlberg Kravis Roberts, Apollo Global Management and Bain Capital.
Meanwhile, such top draw jobs being very few, the firms generally restrict their recruitment to the M7, namely, Harvard, Stanford, Wharton, Kellogg, Booth, Columbia, and MIT Sloan.