Perhaps more than any other high-finance career, private equity divides opinion into two camps: those who believe an MBA will guarantee success in this lucrative arena and those who, simply, do not. Is an MBA necessary for a career in private equity? Debate rages on Internet forums such as eFinancial Careers as well as the print media.

One such correspondent, who works in private equity, says, “My view is that MBAs are a waste of space. Having myself done an MBA, it counts for nothing. I am struck by the discrepancy between what MBAs actually know and what they think they know.” He continues, “I’m happier recruiting people with some financial training, with some exposure to corporate finance or direct industry experience.”

Others agree. “People with industry experience or fresh accountants climb the curve much more quickly than MBAs,” says one. “I think MBAs are better off in general management positions in industry rather than in core financial roles.”

Private equity is an incredibly competitive industry. The salary implications of a successful career are well-reported and the career path, “from a starting position as an Associate at a private equity house,” says Michael Harrington, co-chair of the London Business School Private Equity Club, “is a clear vertical structure, from Associate to Investment Principal and then to Partner. So you are always learning from people with significant experience.”

Careers in this industry are incredibly demanding, challenging and, importantly, stimulating. Professor Chris Higson, from the Accounting Group at London Business School says, “Private equity is a fast-moving industry where you are often transforming whole companies by your actions. It is very stimulating work, and demanding but very well-rewarded.”

Finance is key
Finance is the key word that pops up time and again and a successful candidate for such a career will need supersonic finance skills and training. According to Professor Higson, “the skill-sets private equity houses traditionally require have been core financial skills, such as fundamental financial analyses to recognize an undervalued firm or a firm whose performance can be improved, and then to structure them financially to get the most money for the house.”

As a result, a large proportion of those employed in the current industry have a financial background, such as a Masters of Finance or Accounting, and some experience in corporate finance. Wim Zwaenepoel, Associate Director of the Careers Management Centre at Instituto de Empresa in Madrid, says, “Candidates with an accounting or tax consultancy background or with 2-3 years of experience in investment banking are those usually attempting a career in private equity rather, traditionally, than MBAs.”

MBAs ahead of the game
But the times may be a-changing and smart MBAs are sniffing opportunities for themselves in this area. Markets mature and, as the number of flagging businesses private equity houses tend to move towards decreases, so the required skill-sets change. “Some of most successful houses have provided value-added to the companies they acquire as strategic information rather than simply financial re-engineering,” says Professor Higson. “As such they bring a high level of insight into global strategy and markets and repositioning firms economically. Clearly the MBA training, particularly at a top school such as London Business School, is perfect for that.”

The MBA will be in a position to provide global insight, key in an international finance environment, says Wim Zwaenepoel. “Harvard case studies analyse a specific blue chip company in relation to its main competitors, the overall sector, the markets, the future challenges for the company and industry, etc. Many external factors are taken into account applicable to a career in private equity. An MBA equips you with a good insight into specific sectors into the financial markets and the tools to identify global trends at a micro and macro economic level.”

And as Michael Harrington adds, “MBAs add a network. When you are brought in as an Associate in private equity you are aiming for partner one day. To get there you will need a network of contacts as every deal will need investment bankers or consultants or tax advisors for the portfolio company.”

So is an MBA a useful qualification for a career in private equity? More so than ever before.

Source: Ross Geraghty, QS Top MBA Career Guide