Yep, You Need An MBA

The key ingredients for a career in private equity are hands-on deal experience, a solid work ethic and an MBA, according to the young turks from top LBO firms who shared their career experiences at the recent Buyouts Madness ’08 networking workshop.

The deal experience can come either from cutting your teeth at an investment bank or starting at a small buyout firm. Mark Johnson said the best private equity training he received was not at The Blackstone Group or The Carlyle Group, where he’s currently a principal, but at J.H. Whitney & Co., a small mid-market firm where he worked early in his career. Smaller firms tend to give young professionals more responsibility and opportunities to work on deals than larger firms with massive staffs. Warburg Pincus Principal Jeffrey Goldfaden echoed those comments but stressed the need to keep an eye on a small firm’s fundraising efforts. If a small firm has trouble raising capital, there will be no deals to work on. Also beware if the firm’s performance is tied to one individual, whose name happens to be above the door of the firm, warned Jonathan Korngold, a managing director at buyout firm General Atlantic. “You want to see a diversified partnership base.”

Less important, the panelists agreed, is international and operating experience.

The pros were divided on specialization. “At our firm, if someone’s been too specialized too early it’s probably a negative because we don’t know what deals we’ll be working on,” said Joshua Nelson, a director at THL Partners, a generalist LBO shop. Johnson, who runs Carlyle’s media group, said specialization occurs organically as a by-product of the type of deals you work on, and can work in your favor.

All four panelists strongly recommended getting an MBA, viewing it as the cost of doing business. Three of them hold degrees from Harvard Business School while one slacker went to Stanford. Business schools provide the stamp of legitimacy, a strong network and foster some degree of sound judgment in their students.

Once you’re on board at a PE firm, all four pros say resist the temptation to brownnose. “It’s best just to perform. Along the way, hopefully your personality will stand out,” Korngold said.

Oh, and keep in touch with former colleagues and classmates because, well…you never know.

“Relationships you think may not pan out sometimes do,” and can result in a job,” Goldfaden said.