Private Equity Skills

What Skills Students Should Learn for Private Equity

I’ve been traveling for the last three weeks and during the flights I have been going through some white papers that I’d been meaning to read.  One particularly interesting paper is by a professor at Stetson University titled “Understanding the Skills Needed for Careers in Private Equity Investing.”  The research identifies a major disconnect between general finance education and that needed for investing in private equity.

Although many professionals receive a general business school education and work one or two years at an investment bank or other finance firm, it would be great if an MBA included a more focused study on private equity to prepare graduates for a very unique field.  There are signs of a shift toward educating students on private equity is the Tuck School of Business’s Center for Private Equity and Entrepreneurship as well as the University of North Carolina’s Kenan-Flagler Private Equity Fund which is largely run by students.  I hope that more research is done to show how students and business schools would benefit from a curriculum with a strong focus on private equity.

It’s crucial that students at least have a basic understanding of how to value companies, structure a deal, complete accurate due diligence, manage a portfolio and negotiate with investors and keep them satisfied.  The price for on-the-job training for a venture capitalist could be millions of dollars from your investors, so it’s important to have a curriculum that addresses specific skills necessary for working in private equity.  The skills that private equity professionals should have beyond the existing MBA and finance degree curriculum are:

1. Being able to realistically value businesses in an illiquid start-up context 
2. Contractually structuring the investment
3. Maintaining an effective personal network to both ensure adequate deal flow, and also assist  portfolio companies in securing critical resources
4. Possess the negotiating skills associated with both purchasing and selling an investment
5. Be able to coordinating thorough and effective due diligence

If you have not developed these skills or your business school has not addressed these needs, the author prescribes ways to improve these crucial areas:

1. Do not rely on the “general business requirements” to meet these skills.  
2. Some of these skills are process skills, meaning that they are developed by practice – not merely through understanding the process.   
3. Due diligence is on virtually no one’s curriculum.  There are great books available and free resources online to give you at least a surface knowledge of this area. 
4. A course in private equity investing can be demonstrated to accomplish the purposes of the business capstone class, and might be offered in lieu of Strategic Management, for example.

To read the full white paper, see here.

See our private equity career guide for more information on what you need to succeed in private equity

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