Making a Career in Private Equity: The Myths and the Opportunities
by Jebb Peria, CFA
Intrigued by the mystique and excitement surrounding the world of private equity and keen to find out more about the opportunities for ambitious graduates? Jebb Peria, associate at EVPE, one of the world’s leading specialist private equity firms in the energy sector, gives us the inside track and answers questions on how to build a career in this fascinating and dynamic sector.
I’ve heard of private equity but how does it differ from, say, venture capital or fund management?
Fund management is basically a firm of money managers investing pooled funds from investors. The capital may be invested in traditional asset classes such as equities, fixed income and cash and alternative asset classes such as hedge funds, private equity, real estate, commodities and infrastructure.
Private Equity (PE) is an active form of investment in privately held companies with the objective of growing them over a medium to long-term period. As active investors, PE firms work closely with management to increase and maximise the company’s value through financial engineering, improved governance and operational performance.
At EV Private Equity, we primarily invest in early-growth companies that have: a distinct product or service; the potential to grow rapidly; low levels of debt; and experienced management teams. We seek innovative and disruptive technology companies that can scale and drive superior returns.
Venture Capital (VC) is a subset of PE which provides capital to early-stage businesses, usually in technology-based sectors. Venture capitalists normally invest in high-growth, high-risk, start-up or early-staged ventures, typically with a bias towards technology or innovation. PE tends to focus on later-stage investment in businesses that are more established and are generating cash. VC uses primarily equity while PE may use equity and debt (leverage).
Both PE and VC use a measurement known as MOIC (Multiple On Invested Capital) to calculate the returns they make from their investments. PE target returns range from 2x-5x while VC returns are expected to be higher.
Do I need an MBA from Harvard, a mathematics degree or an accountancy qualification in order to be considered?
No, not necessarily. As a matter of fact, I don’t have any of those credentials. I graduated with a BA in Economics (with highest distinction) from York University in Canada, an MA in Economics from the University of Toronto, and an MSc in Finance from Barcelona GSE. I am also a CFA® charterholder. I guess this depends on which type of PE firm you want to work with as there are generalists and specialists.
As energy specialists, our team at EV Private Equity is comprised of people with substantial experience in the energy industry [oil and gas (O&G), oil field services (OFS)] as well as those from technical disciplines (reservoir, drilling, mechanical, chemical, and software engineering as well as geophysics and naval architecture). We also recruit candidates with graduate business degrees in areas such as MBA, finance, economics, strategy etc.
We have team members with MBAs from INSEAD, Chicago Booth, London Business School, Harvard, Yale, HEC and Robert Gordon.
Do you hire graduates or is it necessary to have prior industry or financial experience?
At EV Private Equity, we hire summer interns and recent graduates, as well as those with previous industry experience. A summer internship at EV offers a glimpse into what we do and how we do it. Several of our team members began their career with EV via this route.
Recent graduates joining EV typically have a business, accounting, finance or economics background combined with strong analytical and financial modelling skills. A strong competitive desire to succeed and a willingness to work in a fast-paced team environment are both big advantages.
As for myself, I joined EV with prior O&G industry experience from Equinor, OFS experience from ALTUS Intervention as well as financial experience from PwC and Royal Bank of Canada.
What are the key technical skills that are needed?
In my opinion, the following are essential:
- A strong interest in understanding technologies
- A strong interest in understanding the O&G industry and the value chain
- Strong analytical, quantitative and financial modelling skills
- Business savviness
Besides quantitative skills, PE requires professionals to have well-developed qualitative skills such as expertise in communication and relationship-building.
What personality types are best suited to a private equity career?
A private equity career would suit achievers and go-getters who are proactive and comfortable working in a hectic environment or under pressure. A willingness to learn and to work outside your comfort zone would be big pluses.
Is it true that private equity is very secretive and is not accountable to any regulators or governments?
EV Private Equity is regulated by the Financial Conduct Authority in the UK and the SEC in the US under the Investment Advisor Act of 1940.
Like any other firm, EV Private Equity and its portfolio companies are obliged to abide by the laws and regulations of all countries we operate in. This is also part of the fiduciary duty towards the firm’s institutional investors, comprised mainly of large public and private pension funds, insurance companies, university endowment funds and sovereign wealth funds.
What are the different roles that are available in the private equity industry (analyst, associate, compliance, consultants)?
At EV Private Equity, the typical career path goes as follows:
(Junior) Analyst –> Senior Analyst –> Associate –> Senior Associate –> Manager –> Director –> Partner –> Senior Partner
We also take on Operating Partners, who are typically former CEOs or COOs to provide our portfolio companies with their extensive operational knowledge and expertise as well as access to a deep industry network.
What is a typical day like in private equity?
I typically start the morning reading through the latest news and market trends. I skim-through DagensNæringsliv, Bloomberg, Financial Times and even LinkedIn to check on the latest oil price, mergers and acquisitions (M&As) and geopolitical news. Then, I read through my emails to check for any updates on the portfolio companies I’m involved with and any immediate requests from the partners.
My day is normally split between fixed deliveries and ad hoc tasks. My deliveries would range from weekly meetings and operational updates with portfolio companies to monthly, quarterly and yearly financial reporting to updating fair market values of portfolio companies to weekly meetings with the digital marketing team. I would also participate in quarterly investor meetings, board meetings as well as annual strategy meetings with my portfolio companies.
If there’s a deal I am involved in, I would build the financial model, perform valuation and sensitivity analysis and support the drafting of the investment paper. I would also be participating in weekly call updates with the due diligence providers regarding any red flags and show stoppers (in other words, developments that may affect our decision to invest).
If one of my portfolio companies is preparing for an exit, I might be having calls with the management and the financial advisors discussing the potential buyers, the market sentiment and the status of the Information Memorandum (IM), the document we share with prospective buyers.
There is not much slack time. If I do have some spare time, I can always find something to work on: a process to simplify and make more efficient; a model to automate; improvements to our social media presence; or offering support to other office locations.
What are the rewards?
Helping to create value for the company and produce superior returns for investors is rewarding and gratifying.
I also get to work with different partners, management teams, board members and technologies. These teach me different insights, strategies, and management styles.
It is very rewarding to work with the smart, entrepreneurial and down-to-earth group of individuals at EV Private Equity. They make the workplace fun and invigorating.
Of course, the job is also financially rewarding. I would like to believe that I am fairly and reasonably remunerated given my performance and contributions, the skillset I bring to the table, and my dedication to my craft.
How good are the prospects for career development?
In my opinion, EV Private Equity offers a fantastic platform for career growth and development.
First and foremost, I get to interact on a regular basis not only with bankers, lawyers, consultants and other legal representatives, but also with CEOs, CFOs, board members and top management teams. I get to participate in board meetings and strategy meetings with my portfolio companies. I basically learn how to run a company.
Second, I get to develop a broad range of business and technical skills, ranging from financial, tax, legal and commercial to IT and ESG. I am able to apply this knowledge, skill and experience in making my own personal investments.
Third, I like the PE partnership structure which offers me a chance to be a co-owner / co-investor. I can be an employee and a co-owner at the same time. There’s much more ownership and accountability.
What are the best things about the job?
One of the best things about my job is the team I am working with. The EV Private Equity family comprises some 20 super smart and talented members representing nine different nationalities and split across three locations. We all know each other very well and treat each other like family.
The points I made in the previous question about rewards are among the best things about the job but one aspect I particularly enjoy is the sheer variety. My work ranges from origination (sourcing deals) to investment to stewardship to exit. I get to experience the full portfolio life cycle.
I really like the fact that EV trusts its staff and treats us like grown-ups. We’re expected to work hard and deliver but with that comes a degree of flexibility. I put in the hours for the company but I can still find quality time for my family and friends and for my twin passions of travelling and CrossFit training.
What are the toughest parts of the job?
I think the most challenging part of the job is probably the long working days during the busy periods of the year. Given the passion, drive and interest required, I honestly do not think PE life is for people seeking a 9 to 5 job. One has just to learn to achieve a balance between work and life.
What are the advantages of a specialist private equity house such as EV?
At EV Private Equity, we are unashamedly narrow and deep in our focus. We invest in new technologies which lower costs, increase productivity and reduce risk for the energy industry. We seek innovative and disruptive technology companies that can scale and drive superior returns. Our track record shows that we know what we are talking about.
We combine global reach with local experience. With our global team in Stavanger, Houston and Aberdeen we deliver deep expertise and strong performance from the heart of the energy industry.
This is supported by our experienced oil and gas executives – a global team with both profound oil and gas industry experience and private equity knowledge.
Finally, we benefit from our global network of senior industry experts who can provide expert opinions on regional, technical and commercial trends in the energy industry.
What are the advantages of being employed by a Norwegian company?
The main advantage is the Norwegian business culture. This focuses on flat non-hierarchical structure, cooperation, equality, trust, empowerment and a balanced work and private life. Work culture is quite informal, and communication is open and direct. It allows juniors like me to contribute and confidently express my views and opinions in board and management meetings as well as team discussions.