Should you start your career in M&A before entering the private equity industry?
This is a common question among finance students, which may be a remnant of a time when Private Equity positions were relatively scarce. During that period, private equity firms primarily hired from the analyst pools in banking and transaction services.
As Private Equity has become more widespread in Europe and a variety of Private Equity firms have emerged in recent years, recruitment practices have changed. While Private Equity remains one of the most demanding, selective, and sought-after sectors in corporate finance, it is now more accessible to recent graduates.
Entering the private equity industry does not necessarily require prior experience in M&A
If you are wondering whether working in M&A is a prerequisite for applying to Private Equity positions, the answer is no. While M&A can be an excellent starting point for a career in finance, it is far from the only option. Therefore, there is no obligation to have M&A experience, nor is there a typical profile or single career path for entering the Private Equity industry.
In fact, many Private Equity firms now hire professionals from a variety of backgrounds. Investment teams may include individuals who began their careers in Private Equity, Venture Capital, strategy consulting, Transaction Services, and even auditing.
Additionally, some sector-specific Private Equity funds may seek financial professionals with expertise in a particular industry. For example, some tech or industrial funds may employ engineers, while Medtech/Healthtech and Biotech funds may recruit hybrid profiles with backgrounds in both finance and medicine/health. Furthermore, some venture capital funds with an entrepreneurial focus may hire former entrepreneurs.
Starting in M&A can be an excellent option for several reasons
First, it allows you to work in a deal-focused environment similar to that of Private Equity. Therefore, you will have the opportunity to see and participate in numerous deals, as well as work on various tasks such as market research and financial modeling.
Secondly, M&A experience can help you quickly develop essential skills required for private equity and other finance professions. The field provides a demanding yet highly supportive environment that is designed to accelerate your professional development through training, performance monitoring, and clear expectations for each level of the job.
Finally, M&A is highly valued by recruiters, which can be a great advantage for those aspiring to enter the private equity industry. Even if you do not secure a position in private equity right away, gaining experience in M&A can help strengthen your resume and increase your chances of success in the future.
Find more arguments in our article: Why work in M&A (especially at the beginning of your career)?
Why avoid M&A and try to start your career directly in Private Equity?
To work as quickly as possible in the sector you like:
If your goal is to work in Private Equity, there may be advantages to starting your career directly in the industry, rather than going through an intermediate step in M&A.
One of the main reasons to start directly in private equity is to work in the sector you are most passionate about as quickly as possible. While it used to be uncommon to find offers for Private Equity analysts straight out of school, the job market has changed significantly in recent years, and it is now less rare.
Additionally, if you see M&A as a stepping stone to your ultimate goal of working in private equity, you may find the time spent in M&A as an unnecessary and potentially long intermediate step. Starting directly in private equity could be more exciting and motivating for you, especially if it aligns with your long-term career goals.
Because the jobs are different:
In M&A or Transaction Services, you won’t be at the heart of the investment or divestment thinking, which means you won’t have the opportunity to work on the long-term support for managers or negotiate and implement the legal agreement. These are all essential elements of the private equity process, and working in private equity can provide you with a deeper understanding of these critical stages.
Bankers and consultants often seek to move into private equity around the Associate/Senior Analyst level, as there is a large part of the work of an equity investor that is not covered in investment banking or Transaction Services. By starting your career directly in private equity, you can avoid the objection of lack of experience in private equity issues and develop a deeper understanding of the field from the start.
To avoid certain less appealing assignments:
Another reason why some might consider starting their career directly in private equity rather than going through M&A is to avoid certain less appealing assignments, such as market research, data processing, slide formatting, and data room follow-up. These tasks can sometimes take up more of a junior analyst’s time in M&A or Transaction Services than in private equity, where they may be able to focus more on financial modeling, valuation, and calls with executives.
Conclusion: should you start with M&A?
Starting in M&A can provide valuable experience and technical skills that are relevant to a career in Private Equity. However, it is not the only path to a career in Private Equity and other options, such as starting directly in the industry may be more appealing to some individuals. Ultimately, there is no one-size-fits-all approach and you should consider your own interests, goals, and skills when deciding how to pursue a career in private equity. If you are not interested in M&A, then don’t force yourself to do anything. You may very well consider starting in Transaction Services or try to break into Private Equity straight from school.
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