How do I Become a Private Equity Analyst?

In order to become a private equity analyst, which is a type of financial analyst, you must have a college education and pass financial certification exams. A bachelor's degree might be sufficient, although many financial analysts have also earned a Master of Business Administration degree. Most regions require formal training for qualified analysts, such as the Chartered Financial Analyst certification in the United States.

To become a private equity analyst, you should master communication and writing skills, because you will be producing research reports, and you need to exhibit a solid grasp of the financial markets. Once certified, private equity analyst careers can be pursued within large institutions or small research firms. Although the industry of private equity goes through peaks and valleys, there is steady demand for financial analysts to detect trends and patterns surrounding this influential sector in the global capital markets.

It is imperative to understand the private equity universe if you strive to become a private equity analyst. Private equity shops might be intertwined with a larger financial institution, such as an investment bank, or they might be private entities that operate solely as a buyout firm. Both operate similarly in that they create a portfolio based on acquiring entire businesses or partial assets of a company. Ideally, they purchase these entities at a discount and typically will keep the holdings in a portfolio for five to seven years before selling.

While the assets are being held, a private equity shop will attempt to improve business operations either by revamping management or enhancing the resources at the company. Once the business has been improved, the private equity firm typically will attempt to sell the asset or issue the business as an initial public offering in the public markets. This is known as an exit strategy, and a private equity analyst seeks to uncover trends in the way firms are exiting investments in particular industries.

To become a private equity analyst, you must be qualified to analyze trends such as capital-raising and the types of deals that are transpiring in the markets. The ability of large buyout firms, for example, to raise capital in a difficult economic environment might signal signs of recovery in that market. A private equity analyst must be able to detect these patterns, assess what is driving the activity and determine where the industry is heading.

There has been a widespread trend in the private equity arena to purchase publicly traded companies and bring them private in what's known as a leveraged buyout. To become a private equity analyst, you must be able to recognize the pace and size of such deals unfolding in the markets, and which companies in certain industries appear to be the most ripe for such a takeover scenario. This helps corporate management teams to consider or prepare for a possible buyout by a private equity firm.