Private Equity & The MBA Degree

by David Kochanek on

The world of private equity is one that has long been shrouded in wide-ranging conceptions and misperceptions among the general public—and no less so to a large percentage of those residing in the world of business and finance.  What is certain is that the domain of private equity is demanding and highly exclusive—positions are coveted and often difficult to obtain.

Myths abound to be sure, especially when it comes to what it takes to break into the industry. Chief among the myths is the long-standing notion that PE is the exclusive domain of investment banking professionals seeking to leverage their experience into buy-side positions offering stratospheric compensation packages. Even an MBA degree from a prestige school, the myth goes, can’t get around this experience hurdle.

Fact is, there is some truth to the myth. There’s no doubt that private equity has long been viewed as the ultimate exit strategy for a banker and that, in the past, the industry has largely been comprised of individuals with such background.  And there remain certain prerequisites for candidates seeking entry into private equity that skew in favor of banking professionals, including the adept ability with financial modeling and deal structure, networking skills, and often an MBA.

Not Your Father’s Private Equity

The fact is that the private equity landscape has changed significantly in recent years and continues to do so, offering new paths for professionals from myriad backgrounds. It is an industry that is much more multi-dimensional than in the past.

Today’s firms often employ strategies that are more operations-focused, requiring longer investment horizons than in the past. While financial engineering remains a major component in private equity investment, the model employed by many in the industry today is much more holistic in nature. Along the lines of VC investment, firms are very much focused on improving each investment from a variety of angles, including finding operational efficiencies and revenue growth opportunities.

To meet the new needs required by a buy, build and hold strategy, many private equity firms have expanded their focus beyond that of pure financial engineers. They now seek to leverage the skill sets of a more diverse talent pool with experience in a variety of industries and functions capable of managing corporate operations and change. This simply can’t be accomplished through a model that is reliant exclusively on the skill sets of those hailing from investment banking.

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  • Dreamer

    I think admissions committee makes mistakes as well. Plus also when you need a diverse class, people come from different backgrounds but a lot of them want the same jobs so some people migth loose out to other more compelling candidates.

  • Fstratford

    According to this article, if you look only at Directors and above, the distribution of MBAs is Harvard (38%), Chicago Booth (12%), Stanford (9%), Wharton (7%), and Columbia (5%) NoMBA (29%).

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