Private Equity is essentially about buying and selling companies. But what do private equity professionals really do on a day-to-day basis? The time of private equity professionals is divided between four main categories:
Raising money
This task is mostly performed by the senior partners in a private equity fund, but there is sometimes a dedicated fund raising team within some of the larger funds. Essentially, every 4-5 years or so, the senior management will go knock at the door of international investors such as pension funds, banks, insurance companies and high net worth individuals to raise money for their next fund. This goes in cycle: when the current fund is close of be fully spent (i.e. ~70-80% of the money has been invested in companies), the senior management will go on the road and ask for fresh money.
Fundraising involves presenting the past performance of the fund, its strategy, and the individuals working in the firm that will be in charge of making investments. All of this in order to convince those institutions to invest money with the firm.
Sourcing and making investments
The "sourcing" (i.e. finding investments) part done largely by mid-to senior management, and involves looking for potential targets and reaching out to the management of those companies, either directly or via a middleman (such as investment banks). Many private equity funds will specialise in sectors and/or regions and have dedicated teams with very strong knowledge of all the attractive companies in a specific sector and will also know potential targets' management teams well.
The "making" part, which represents the process of acquiring a company, is the responsibility of the junior team, under the seniors supervision. This involves drilling into the financial performance of the company, analysing the trends in the industry, negotiating with the target and coordinating the work of advisors such as investment banks, accountants, strategy consultants, lawyers, technical experts, etc. Once they have analysed sufficient information, the team will present an "investment paper" to the senior partners to propose the investment. The senior partners will then vote to accept or reject the investment.
Managing investments
Once a company has been acquired, it needs to be managed for a couple of years until it is sold off. While private equity professionals are not involved in the day-to-day running of the companies they buy, they will monitor performance and be involved in important strategic decisions. While some firms have specialist teams that management investments ("operations teams"), most of the time the team that worked on the transaction will be in charge of monitoring the company.
Selling off companies
Returns are only really generated when companies are sold (at a profit). Investments are typically kept for 3 to 5 years, and after that time period they will be sold off. This process is also usually managed by the more junior team under the senior management supervision. Companies can be sold though a sale to another company, sale to another private equity firm, or via an IPO on the stock market.