10 tips to keep your private equity career on track

Let’s say you’re a post-MBA associate at a buyout shop, and you’re itching to move up the career ladder. How do you do it? How do you send that unmistakable, unspoken message to the partners that you’ll be one of them one day?

I took that question to two sources, including someone who has done it in dramatically speedy fashion—the 45-year-old Terry Mullen, the Arsenal Capital partner who launched his buyout shop in 2000 following a brilliant career at Thomas H. Lee Partners.

After graduating college in 1989, Mullen joined the corporate finance group at Morgan Stanley, working on transportation deals. He parlayed that experience into an analyst position at Thomas H. Lee Partners in the early 1990s. After getting his MBA from Harvard Business School, Mullen returned to Thomas H. Lee in the mid-1990s as an associate. Mullen was promoted to vice president, one rung below managing director at the firm, by the time he left to form his own shop in early 2000.

I also spoke with Peggy Roberts, chief of staff of the Riverside Capital Appreciation Fund, the main fund family at the Riverside Company. Roberts joined the lower mid-market specialist  as a senior associate in 2004 after getting her MBA at the Darden Graduate School of Business Administration at University of Virginia and a stint in investment banking. She spent six years leading organizational development and IT during a period of rapid expansion before joining the Riverside Capital Appreciation Fund to help manage a 43-person team. Roberts played a big role in developing a system for talent development at the Riverside Company. I boiled their advice down to 10 top tips.

1. Develop your creative side

Nothing shouts future partner like the ability to come up with ways to justify paying enough for a company to persuade the owners to sell and to simultaneously beat back any rival bidders. In sifting through information from expert networks, trade associations, business executives, colleagues and countless other sources, can you find that potential add-on acquisition others might have missed? Can you find a way to super-charge organic growth? Find creative ways that your target companies can grow, and senior partners will be fighting to get you on their deal teams.

2. Be passionate about management teams

It’s a given you’re great at analyzing financial statements, making financial projections, and identifying red flags in the numbers. When it comes to crunch time, you can pull all-nighters with the best of them. But to really impress the partners, said Roberts of the Riverside Company, you have to get out in the field and spend time with management teams. Volunteer for as many on-site visits as you can, even if the company looks like a long shot. Ask smart questions and learn about the business and its industry. Show management teams and your partners that you have a passion for businesses—how they work, why sometimes they don’t, how you can help—and you’ll be on the path to promotion.

3. Constantly expand your skill set

Thinks of yourself as a decathlete, suggests Arsenal Capital’s Mullen. Once you’ve mastered the shot put and javelin, you’re still only 20% of the way to being competitive. As a post-MBA associate you’re already good at building models and working with spreadsheets; you’re brimming with energy. But never forget, throughout your career, that you have many more skills to master—relationship skills so that your team members trust you, project management skills to keep due diligence on track, management skills so that one day you can lead a deal team, fundraising skills so that you can help keep the war chest filled. By the same token, be honest with yourself about weaknesses and what you don’t know; look to your team members to fill in the gaps.

4. Develop deep industry expertise

While you want to constantly broaden your skill set, you also need to develop deep expertise in at least an industry or two. Don’t think of this as limiting. Many of the best-performing private equity firms specialize in a single field; even many historically generalist firms now channel their energies into just a handful of markets. At Arsenal Capital, which specializes in health care, specialty industrial and financial services, Mullen said the best way for junior professionals to have an impact is to really know their fields. Know the growth trends. Know how technological innovations are affecting companies. Think strategically and become that person in the room who’s really additive.

5. Figure out what kind of deal-maker you are—before your firm does

Do you like working with small companies, mid-sized companies, or large companies? Are you someone who’s naturally kind, considerate and supportive of colleagues, or do you thrive in a more cut-throat work environment? Do you, like Arsenal Capital’s Mullen, think of yourself as someone committed to acting with integrity, honesty, trust and respect at all times? Figure out who you are, and find a firm whose culture and values are a good fit. If you can’t figure out where you belong, you’re putting your career at risk before it really gets started.

6. Remember that private equity is a team sport

This may seem like ironic advice in a piece about how to move up the ranks, but in the heat of deal-making it can help to maintain a zen-like remove from your own ambition and self-interest. If you’re trying to get a hand on all the best deals you could mark yourself a poor cultural fit, said Roberts of the Riverside Company. Did you take advantage of that opportunity to mentor a pre-MBA associate? Are you willing to be exceptionally flexible in what roles and responsibilities you take on for any given transaction? Be willing to pitch in, be upfront about how much you can accomplish in a given period of time, and ask for help from your team when you need it. This is the path to enlightenment—err, partnership.

7. Don’t underestimate your influence on senior dealmakers

Do you think of the VPs, principals and partners at your firms as the only ones with the power to make or kill a deal? It’s just not so. Passion is contagious, even if you’re only in your late 20s and your title is senior associate. Develop a vision for a company, get smart about the industry, get excited about the deal, and explain to the lead partner why you’re so passionate. Said Roberts: When senior deal partners see they have someone with “fire in the belly” on their teams they’re much more likely to try to figure out a way to get the deal done. Make deals happen, and you’re well on your way to making partner.

8. Show grace in the face of adversity

Not even the legends of private equity win every deal, and none hits home runs every time up. Entrepreneurs frequently back out of deals at the last minute, caring not a whit about the months you spent wooing them and researching their company. Companies you had a big hand in landing don’t always perform as expected. Some even end up filing for Chapter 11. Partners will be watching your reaction. How do you handle the disappointment? Do you go into a funk? Or do you quickly rebound and take away lessons, contacts and knowledge that you can use to score your next deal?

9. Be confident but avoid hubris

The worst mistake you can make in private equity is to get overconfident from past success. The world changes. The opportunities change. Did your firm make a killing on a yellow pages roll-up in your pre-MBA job? That transaction may have nothing to say about the yellow pages company you’re looking at several years later as a senior associate. Said Arsenal Capital’s Mullen. “You have to constantly hone your judgment.”

10. Ask what limited partners would want you to do

Maybe you don’t give much thought to the pension funds, endowments, foundations and other investors that ultimately supply most of your capital. That’s for the senior partners to worry about, right? But in fact, just as you should dress like a partner if you want to be one, you should try to think like one too, even at the start of your career, according to the Riverside Company’s Roberts. Say you’ve got a letter of intent signed with a target company, and you’ve just spent the last three weeks of your life making sure the company is operating as advertised. But something doesn’t feel right. Rank-and-file employees are sending unmistakable hints of accounting problems. How well will you communicate these issues to the lead deal partner? How would your limited partners want you and your deal team to behave? “The sooner the senior associate gets into the mindset of our investors, the better,” said Roberts.

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