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Of the U.S. News top 10 ranked full-time MBA programs for 2010, an estimated 6% of first year students did a PE internship and 4% went into private equity (PE) full-time post-MBA.  By the numbers you can quickly see that even at elite business schools, private equity remains one of the most coveted of MBA jobs.  Yet despite the high barrier to entry into the industry, private equity continues to be a very popular career choice for incoming MBA students.

What is the allure of private equity that has eager b-school students pursuing this industry in droves? The attractiveness of the PE industry has much to do with the type of work PE professionals do – identifying investments, typically solid companies that are underperforming or are undervalued relative to their revenue potential, adding value to those investments through financing and operational strategies to grow the company, and then exiting (selling) the company for a very healthy profit.

The job is rigorous, which can involve both financial and quantitative work, as well as providing advisory to portfolio companies to optimize business operations.  Every year a fresh crop of incoming MBA students set their sites on breaking (or re-entering) into private equity.  Of course, the question is – can they make the leap?

Take Stock of Your Pre-MBA Work Experience

As many PE-focused MBAs know, the prototypical track from undergrad into the industry is 2-2-2 – Two years as an analyst at a top investment bank (or less commonly, at a marquee consulting firm), two years at a private equity firm and two years of business school.  Investment banking analysts get equipped early on with the financial modeling skills that are heavily used as a PE analyst.  Consultants also receive strong training in the form of problem-solving frameworks and exposure to operational challenges at client companies.  Both routes help develop the polish and maturity required for private equity.

Now, if you don’t have this prototypical experience, all is not lost.  You will have a lot of work to do to get yourself competitive to land a PE internship, but it is possible.  Focus on strengths that you do bring, whether that be specific sector knowledge, deal experience, or personal characteristics such as an entrepreneurial mindset, passion for investing or excellent business acumen.

Fully Leverage Your B-School Experience

While MBA students who are career advancers within PE (i.e. they had prior PE experience) may have advantages over their career-switching classmates, having come from PE is no guarantee that you’ll be successful going back into the industry.  The type of PE firms you’re focusing on (e.g. buy-out funds, growth equity, mezzanine), the size of the fund ($millions to $billions), the investment focus and geography, are all variables in your PE job search equation.

Regardless of the reputation and size of your program, successfully landing a job in private equity will be very challenging.  There are many ways you can leverage your experience at business school to move yourself into position to be more competitive. Expect that even if you do these things that the search will be arduous and take your full commitment, starting from the first day of b-school.

The Sharpening Process

What allows MBA students to make dramatic career switches is what we term ‘The Sharpening Process,’ that occurs during both the first and second year of a full-time program.  Through carefully chosen academic work, experiential opportunities and a steady acquisition of industry knowledge you can hone your candidacy for a PE job throughout the first year of school.  Those first-year students who are able to methodically go through this sharpening process while starting to cultivate their ever-growing network of PE professionals will greatly increase their chances of finding themselves in PE for the summer.  Some key elements of this sharpening process are below:

• Classes – In addition to the requisite finance and accounting classes you will take, additional coursework will help augment your applied knowledge and skills for private equity.  Below is a sampling of relevant courses you could find at top-tier MBA programs, such as Wharton, Chicago Booth, Stanford and HBS: Corporate Valuation, The Finance of Buyouts & Acquisitions, M&A Accounting, Competitive Strategy, and Venture Capital and Private Equity. In addition, look for opportunities to shore up your modeling skills through training for company valuation and LBO modeling provided by companies such as Training the Street.

• Student Groups – Plan on joining your schools Private Equity / Venture Capital student group, which will play an important role in getting you connected with the PE community within the school and educational events that will help you learn more about the industry.  The PE student group gives you a chance to network with classmates that may have come from PE, allowing you to build friendships and help each other with leads in your respective job searches (assuming this collegiality is the norm among students). 

• Experiential Learning (in-school) – Certain b-schools will offer case competitions that you can participate in with classmates which simulate working on deal teams.  Participating in events such as M&A challenges and LBO case competitions will give you the opportunity to hone your financial and deal-making skills, as well as provide you with a great talking point on your resume.  Your active involvement also signals commitment to and interest in the PE industry.

• Networking – Networking is the single most important activity that you need to be engaged in to secure an internship and, afterwards, a full-time position in PE.  The private equity industry is a tightly knit community of professionals.  PE firms can vary in size from 5-person teams to mega-funds employing hundreds of investment professionals.  Regardless of the size of the firm, making connections within the industry is based on building relationships and one’s own reputation over time.  This is a process that can’t be rushed or forced, and will require reaching out to PE professionals in your b-school and undergrad networks, as well as those outside your ‘warm’ contacts for informational interviews.  You can also meet these individuals at PE conferences, both those that are held by business schools and professional private equity associations.  The bottom line is you must effectively network in order to be successful in your PE job search.

• The Internship – Large, well-established private equity firms may or may not take interns, depending on the firm.  If they do hire, they will do so earliest in the internship recruiting cycle, perhaps as early as the fall or winter of the first year.  However, most PE firms will not actively seek interns, and if they do, will hire just-in-time.  This means mentally preparing to continue your search into the spring and perhaps even the first few weeks of summer – well past when on-campus recruiting for most schools has wrapped up.  While a PE internship is difficult to land, the irony is that the longer you hold out in your search the more likely you are to actually land an internship.  The reasons for this are several fold: (1) Candidates (i.e. other MBA students) will ‘drop-off’ from the PE search as the year goes on because the level of difficulty, (2) going through the Sharpening Process mentioned above should make you a more attractive candidate as time goes on, and (3) the number of PE firms in the US (assuming a US-based search) is approximately 1,824 and the number of PE firms worldwide is 2,560 (Pitchbook.com); plenty of targets to choose from.

Other Ways to Make the Leap – Additional strategies you can use to secure your private equity internship include the following:

• Experiential Labs – Apply for any opportunities that will give you exposure to private equity.  For example, at Chicago Booth the Private Equity & Venture Capital Lab gives students firsthand experience in the private equity industry through an intensive internship at a PE firm.
• In-school internships – If you find firms within the city where your school is based, consider doing an internship during the school year when firms could use an analyst to do due diligence work for deals the firm is currently working on.

While a PE internship is highly recommended even for those with prior PE experience, it is a MUST for career switchers who expect to have any chance of going into the industry immediately post-MBA.  Those with prior PE experience can also look to get operational experience or consider hedge funds.  What is most important is to identify gaps in your experience and seek to round out your skill set as a PE investor.

Best of luck in ‘making the leap!

Many MBA applicants with military backgrounds are looking for ways to emphasize transferable military skills which can strengthen their candidacy. While military veterans possessing well-developed leadership skills is a well known fact, recently Efraim Benmelech and Carola Frydman from Harvard University and MIT Sloan School of Business have analyzed the effect of military service of CEOs on a host of managerial decisions, corporate policies and outcomes¹.

The research concluded that CEOs who serve in the military tend to have lower investments, their firms are less likely to be involved in fraud, and they seem to perform better in times of industry distress. However, it found no effect on financial policies, accounting measures of performance, and valuation.

According to the research, these findings are particularly significant in light of the steady decline of CEOs with military backgrounds that Corporate America has witnessed in the past 25 years. The reduction in the supply of executives who have conservative investment policies, are less prone to fraud and plausibly, are better equipped to navigate through times of crisis may be detrimental for firms if these skills cannot be easily provided to individuals through alternative sources, such as MBA programs.

In the wake of the most current financial crisis, where business ethics and the ability to cope with financial distress may be especially critical, skills developed in the military and described in the research may be very valuable for many American corporations.  These skills should be taken into account by business schools in their admissions process, and further explored during interactions with the applicant, particularly in the admissions interview.

1. Efraim Benmelech and Carola Frydman, Military CEOs

I often receive emails from business school candidates who are looking to attend an MBA program. Typically the individual is only looking to attend one MBA program and is wondering how we can get them accepted right away. The individual is focused on a very detailed destination, but as we look deeper to talk about their goals, we come to question whether business school is the right next step.

Most individuals feel that business school can solve all problems. To most people, it seems like the right step. As you go down this path of MBA applications, it is easy to think about the name of that prestigious MBA program on your resume and how it will open any door you want. However, an MBA degree is not the end goal; it’s just a means to an end.

One way to find out whether an MBA program is the right choice for you is to examine your short and long-term goals and decide whether the MBA will be an asset in helping you reach your destination. Admissions committees will be asking this question and one of the easiest ways to not receive an acceptance letter is to discuss a set of goals that is not applicable to an MBA degree. As an example, perhaps you should be pursuing a degree in another field.

There are many individuals who do not know exactly what they want to pursue as a career. Because post business careers tend to be more flexible, it can appeal to an individual who wants to take reexamine his or her career. Stating more ambiguous reasons such as leadership experience or a stronger alumni network is justified. However, not every person wants to be a leader, and not everyone needs an impressive network. Make sure to be honest with yourself as you consider business school.

As you contemplate whether business school is the right choice, it is important to be realistic about what an MBA program can help you with. This will be different for each person. For some people it may be a chance to interview with a specific company. For some it may be the credibility it brings to your resume when you go to raise money for a company you are starting. Make sure you understand what you are looking for from business school and decide whether it can really provide what you need. This is a good time to do research, meet with business school students, and speak with individuals in your target career. Find out what they think of your decision to apply to an MBA program. Decide if the experience they are talking about sounds like a good idea for you.

For more robust guidance on your MBA application essays, check out the Stacy Blackman Consulting Essay Guide Series – school specific guides with essay tips, sample essays, information on what your target schools value and more.
Visit http://www.stacyblackman.com/essay-guides/ to learn more.

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Founded in 2001, Stacy Blackman Consulting has helped thousands of MBA applicants gain admission to the most selective business schools in the world. The Stacy Blackman team, comprised of MBA graduates, former admissions officers and expert writers, editors and marketers, helps clients develop and implement a winning marketing strategy. Stacy Blackman clients have a significantly increased probability of admission to top schools and are frequent recipients of merit scholarships. The company is regularly featured in publications such as BusinessWeek, the Wall Street Journal and the Economist. Visit the Stacy Blackman blog for daily news updates and admissions tips, and check out the company’s e-publications for more in depth school-by-school guidance.