Consulting To Private Equity (Everything You Need To Know)

Understand how to move from consulting to the private equity industry
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By Mike Hinckley
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    Many consultants are interested in making the jump from consulting to private equity.  Indeed, consulting is the second most common path into private equity, behind only investment banking. 

    However, it can be a difficult transition, and not all private equity firms are open to consultant hires.  

    In this article, I’ll lay out the benefits and challenges to making the jump, as well as various tips and strategies that can help you make the jump.

    Can you move from consulting to private equity?

    Yes, professionals with consulting experience can move into private equity. 

    Many private equity firms value the skills and expertise consultants bring to the table, such as analytical thinking, problem-solving, and communicating effectively with clients.

    That being said, some firms are exclusively interested in hires with investment banking or other backgrounds.  

    They reason that investment banking provides more financial modeling training that will be directly useful and relevant for the job.  Since private equity firms aren’t typically setup for zero-to-one mentorship, it can be tough to take candidates who don’t have these base skills. 

    This is why, sometimes transitioning from consulting to private equity can be challenging and may require additional preparation for your interviews

    A comparison of consulting and private equity as career options

    Consulting and private equity are both lucrative and competitive career options that offer a wide range of opportunities. 

    Here is a comparison of these two career paths:

    Nature of work: Consulting involves providing advice and expertise to clients on a wide range of business issues, while private equity involves actively acquiring and managing a portfolio of companies to improve their operations and increase their value. In PE, you’ll be more hands-on, driving operational changes, cost optimizations, or strategic pivots within companies you invest in, whereas consulting generally focuses on providing high-level strategic recommendations.

    Level of responsibility: Both paths expect lots of responsibility from their employees, but I’d say that there’s no higher responsibility than investing someone else’s money (which is what private equity investors do). In PE, the stakes are particularly high as your decisions directly affect the financial returns and overall success of investments, often involving millions or even billions of dollars.

    Earning potential: While both consulting and private equity can be high-paying careers, private equity investors make more money given their ability to share in the upside of their deals (e.g. carry, bonus, etc.) Entry-level PE associates can expect total compensation ranging from $150,000 to $300,000 annually, significantly boosted by bonuses and carried interest, while consultants at similar levels generally see earnings between $100,000 and $160,000. Find out more in our growth equity compensation guide.

    Work-life balance: The demands of both consulting and private equity can make it difficult to achieve a healthy work-life balance. Both industries may require long hours and significant travel.  While you’ll travel for deals in private equity, consulting is famous for the 4-days of travel per week grind, so keep that in mind too. In private equity, intense periods of work can coincide with deal closings, often leading to 60-80 hour weeks, though the travel burden is usually lighter than in consulting.

    Clear career progression: Consulting firms tend to be large with a very hierarchical structure and clear paths for advancement. Since private equity firms tend to skew smaller, they also tend to be flatter, which can provide more opportunities but can also make career progress somewhat murkier.  Also, in private equity firms, sometimes there’s a large pool of colleagues competing for relatively few partner roles (which older folks don’t give up lightly).  This can stall your progression, as promotions in PE often depend on firm growth and openings in senior positions.

    Exposure to new industries and clients: One of the best things about consulting and private equity is that they both offer the opportunity to work with a wide range of industries and clients. Each new deal or client project provides an opportunity to jump into a new industry and learn about a new part of the world. In consulting, this exposure is broad but often surface-level; in private equity, the exposure is deeper, requiring detailed understanding and involvement in the operations and strategic management of portfolio companies.

    Comparison of moving to private equity

    Benefits of moving to private equity

    There are several potential benefits to moving from consulting to private equity, including:

    • Direct impact: As owners of businesses, private equity professionals have the opportunity to make a significant impact on the companies in which they invest.  Meanwhile, consultants are limited to advising from the sidelines. (This is one of the biggest reasons why I personally was attracted to private equity and growth equity investing)
    • Real responsibility: Related to the previous point, private equity firms are investing other people’s money, which confers a level of responsibility that is unrivaled
    • Higher earning potential: Private equity (and growth equity) professionals often earn higher salaries and have the potential to earn a share of the profits generated by successful investments through carry
    • Avoidance of 4-day travel week – While private equity professionals travel for deals, they do not travel as frequently as most consultants, who are famous for their 4-days per week travel schedule while they are on-site with clients

    Disadvantages of moving to private equity

    To be fair, let’s look at the downsides of moving from consulting to private equity. These include:

    • Longer hours and greater workload: Private equity professionals may be required to work longer hours and take on a greater workload than they would in consulting, especially during the due diligence and deal-closing stages of an investment.
    • Higher risk: Private equity involves a higher level of risk than consulting, as investments can sometimes fail to deliver the expected returns. Private equity firms may not have the same level of stability as consulting firms, as the success of their investments can be highly dependent on market conditions and investment outcomes
    • Limited work-life balance: The demands of the private equity industry can make it difficult to achieve a healthy work-life balance; however, it is usually somewhat better than investment banking roles
    • Less clear career progression: Private equity firms have career levels, but since firms are smaller, the career path is often less certain and your promotion every couple years is not always assured

    It’s important to carefully weigh the potential benefits and disadvantages of a career in private equity before deciding to transition from consulting.

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    Action Steps for Transitioning from Consulting to Private Equity

    Step 1: Identify Your Target Firms

    Research and list private equity firms that have previously hired consultants. Use LinkedIn or industry-specific job boards to refine your list to firms with a track record of consultant hires.

    Step 2: Build Relevant Skills

    Enroll in specialized financial modeling courses. Focus on mastering key PE metrics such as IRR and MOIC.

    Step 3: Gain Deal Experience

    Seek out consulting projects that involve M&A or private equity due diligence. Highlight these experiences in your resume to demonstrate your exposure to deal processes.

    Step 4: Network Strategically

    Leverage your existing contacts and expand your network within the PE industry. Attend PE-focused networking events, join relevant LinkedIn groups, and connect with PE professionals who transitioned from consulting.

    Step 5: Tailor Your Application Materials

    Customize your resume and cover letter to emphasize skills and experiences relevant to PE, such as financial modeling, industry specialization, and deal involvement. Use specific language that resonates with PE hiring managers.

    Step 6: Prepare for PE Interviews

    Prepare thoroughly for PE interviews, which often include technical questions, case studies, and investment pitches. Practice these elements extensively to build confidence and showcase your readiness for a PE role.

    Step 7: Consider Interim Roles

    Explore roles like in-house consulting at PE firms or operational roles within portfolio companies. These can serve as stepping stones to an investing position and provide valuable experience within the PE ecosystem.

    Leveraging Non-Traditional Tactics for Landing Private Equity Roles

    Breaking into private equity often requires going beyond traditional job applications. Here are some effective strategies to stand out:

    • Utilize Alumni Networks: Connect with alumni who are already in private equity. Alumni are often more willing to offer insights, introductions, or even mentorship.
    • Cold Emailing: Craft personalized cold emails to professionals in the industry. Focus on building relationships by asking for advice or insights rather than directly seeking job opportunities.
    • Seek Informational Interviews: Approach professionals for informational interviews to learn more about their career paths and the industry. This approach can help you build connections organically and stay top-of-mind for future opportunities.
    • Engage in Industry-Specific Forums and Events: Participate in private equity forums, webinars, and networking events. Engaging in discussions and asking thoughtful questions can increase your visibility among industry professionals.
    • Leverage Social Media Platforms: Use LinkedIn to follow firms and engage with content shared by industry leaders. Comment thoughtfully on posts or share insights to demonstrate your interest and knowledge in private equity.
    • Offer to Assist on Projects or Research: Proactively offer to help with industry research, deal analysis, or other relevant projects, especially for smaller firms or individuals who might appreciate the extra help.
    • Join Private Equity Clubs or Associations: Become a member of private equity clubs, either virtually or in-person, to gain access to exclusive networking events, newsletters, and job postings that aren’t publicly advertised.
    • Utilize Niche Job Boards and Websites: Explore niche job boards and platforms that specialize in private equity roles, as these often feature opportunities not listed on mainstream job sites.

    Tips for consultants looking to moving to private equity

    Here are some pieces of advice for consultants interested in pursuing a career in private equity:

    Specialize in an industry or vertical: It can be an edge and lower the hiring bar with private equity firms if you can brand yourself as an industry specialist in a specific niche they are looking to hire for.  That’s why consultants interested in private equity may want to consider gaining additional industry-specific knowledge and experience, either through additional education or by seeking out opportunities for hands-on experience in their field of interest.

    Consult on private equity transaction diligences:  If you don’t want to brand yourself as an industry specialist, the next best way to get into private equity from consulting is to work on consulting teams that conduct due diligence for M&A or private equity transactions.  While this isn’t one-to-one with what you’ll do as an investor, it will certainly give you an edge in recruiting since you’ll have deals to talk about and can claim to know the ropes a bit.

    Build a strong financial foundation (aka LEARN MODELING): Private equity firms tend to look for candidates with a strong financial background and candidates who they won’t need to teach the basics. Consultants interested in private equity may want to consider gaining additional training.  MBA and CFA can be helpful for this; however, there are other great options for learning how to ace financial modeling 🙂 

    Develop a network within the private equity industry: Building a strong network within the private equity industry can be crucial for sourcing investing job opportunities. Consultants may want to network with private equity professionals to build relationships and make connections in advance of recruiting.  Check out my full guide on how to network with private equity and growth equity investors

    Consider consulting roles within private equity firms:  Many large private equity firms have in-house consultants who assist portfolio companies with operational or strategic issues.  While these roles are not on the investing team, they can be interesting and great roles within private equity firms.  One note, it’s uncommon (but not impossible) that one can transfer from one of these roles into private or growth equity.  So, if you decide to go this route, you should be clear with yourself on whether you want to be on the investing team and whether you’ll have a shot at doing so at this firm.

    Seek out firms who have hired consultants previously:  LinkedIn is an incredible resource, and it offers free trials for their pro tools.  Get a free trial and search for private equity firms that have employees who have worked in consulting before.  This is the best way to know if they’d be open to hiring consultants again.  There’s always a chance firms are open to it even though they haven’t hired one yet, but better to know your odds ahead of time.  Once you have your list, start networking!

    Addressing Common Concerns PE Firms Have About Hiring Consultants

    When transitioning from consulting to private equity, it’s important to be prepared for common concerns that PE firms may have. Here’s how to effectively address them:

    Concern: Gaps in Financial Modeling Skills

    • Action: Acknowledge that while consulting emphasizes strategic thinking, PE demands rigorous financial modeling. Highlight your proactive learning efforts, such as completing advanced modeling courses or obtaining certifications like CFA, and emphasize how your strategic acumen complements these technical skills, making you a well-rounded candidate.

    Concern: Limited Deal Experience

    • Action: Understand that PE firms value hands-on deal experience. Illustrate your involvement in M&A-related consulting work, such as due diligence or post-merger integration, and draw parallels between these experiences and the skills needed in PE, such as assessing investment risks or driving operational improvements.

    Concern: Fit within the Investment Team Culture

    • Action: Private equity firms often have close-knit teams and may be concerned about cultural fit. Demonstrate your adaptability by sharing examples of how you’ve successfully integrated into various client environments or diverse project teams, highlighting your collaborative approach and flexibility in high-pressure situations.

    Concern: Understanding of Value Creation Beyond Strategy

    • Action: PE firms look for candidates who can drive value creation beyond just strategic recommendations. Emphasize any consulting projects where you’ve taken a hands-on approach to implementation, such as leading operational improvements, working on cost reduction strategies, or directly contributing to financial performance metrics.

    Concern: Lack of Sector Specialization

    • Action: PE firms often prefer candidates with deep sector expertise. If your consulting experience has been broad, identify specific industries where you’ve spent the most time and develop a narrative around your specialized insights. Consider gaining additional certifications or engaging in targeted projects to bolster your industry credibility.

    By knowing these common concerns of private equity firms, you can effectively prepare responses to address them and position yourself as a strong candidate.

    Common Mistakes When Transitioning from Consulting to Private Equity

    Making the jump from consulting to private equity can be rewarding, but there are common pitfalls that many consultants encounter. Recognizing and addressing these challenges early can help smooth your transition:

    • Overestimating your financial skills: Consultants often underestimate the importance of advanced financial modeling in private equity. To avoid this, invest time in honing your modeling skills through courses or self-study.
    • Neglecting industry specialization: A broad consulting background can sometimes be seen as unfocused. Private equity firms value deep industry knowledge, so focus on specializing in a specific sector that aligns with your target firms.
    • Assuming consulting success equals PE success: The skill sets are complementary but not identical. Private equity requires a mindset shift towards investing and value creation. Engage in self-education on PE-specific strategies to bridge this gap.
    • Insufficient networking within PE circles: Unlike consulting, where structured hiring processes are the norm, private equity often relies on personal connections. Avoid limiting your network to consulting; actively seek relationships within the private equity community.
    • Being unprepared for PE interview dynamics: PE interviews can be grueling, with a heavy focus on technical skills, case studies, and investment pitches. Prepare thoroughly by practicing financial modeling and reviewing PE-specific interview formats.

    Final Takeaway

    So that’s it. I’ve brought you from start to finish in our guide to private equity consulting. 

    To know more about the industry, we encourage you to conduct your own due diligence and speak with other professionals in this field through networking

    If you’re determined to join the ranks of a private equity firm, it’s up to you to distinguish yourself from the rest to secure an offer!

    I hope these tips help!

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