A Day in the Life of a Private Equity Research Analyst

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I never had any idea what working in finance meant. To be honest, for the entire first 18 years of my life, I was in the dark about the finance industry. You might think that’s ironic as this IS a personal finance website, but in reality, finance and personal finance are two VERY different things. Personal finance is all about managing your own money and your own wealth creation. FINANCE™ is much more complex than that.

Even when I started working IN finance, I didn’t know what it was all about. I was lucky enough to land my position without knowing too much and basically had to learn everything on the job. Now, about half a year in, I’m starting to have a better understanding of the industry as a whole.

Despite that, I don’t feel comfortable speaking for the entire finance industry. In fact, I don’t even feel comfortable generalizing the private equity industry (the sector that I work in). That’s why in this post, I’ll just be sharing my OWN experience working as a research analyst at a small-cap private equity firm in Toronto, Canada. If you don’t know what that is, don’t worry, you’ll find out very soon.

What is a Private Equity Fund?

brown and gray painted house in front of road; What does a private equity analyst do?
What does a private equity analyst do?

Before we dive into what a working day looks like for me, it’s important to understand a bit about private equity. So… what is it?

Distilled down to its basics, private equity is about finding good PRIVATE businesses to buy, buying them, making them better, and then selling them later on. Something important to note is that private businesses are just companies not listed on public exchanges. AKA, not Google, Amazon, Facebook, Netflix, Starbucks, etc.

If you’re still confused, that’s ok. I was too for a while. But I find it helpful to think of it as buying houses. Imagine there’s a decent house near your neighbourhood that is going for sale. It’s a little run-down but has a lot of potential. You then do some research on the house and determine that it’s in a good area at a reasonable price. So you buy it for $500,000! Then, over the next 7 years, you renovate it, rent it out, and turn it into a cash-flowing property. Finally, you list it for sale and go through the process of selling the house.

Because you made the house so much better, you’re now able to sell it for a LOT more. You get an offer for $1.5 million and accept it! Your profit in these 7 years would be $1 million dollars (not counting any rental cashflow).

The above scenario is essentially what private equity funds do. The only difference is that instead of houses, they’re usually buying multi-million dollar businesses. What this means is that a lot more work goes into researching whether the company is a good buy, but the profits are potentially MUCH higher than that of a house.

The Various Roles in Private Equity

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What does a private equity analyst do?

When you’re buying a house, it might be just you who’s doing all the leg work, but in private equity, there’s usually a team that tackles the process. Here are the various roles involved and my understanding of what each one does.

Partner

At the top of the chain is the partner or partners (plural). Partners usually have their own money invested into the business and are in charge of making high-level decisions. “Considering all of the information we’ve received, should we or should we not buy this business?”

Daily tasks for partners might be:

  • Meetings with management (the CEOs of companies they’re considering)
  • Figuring out how best to structure the deal
  • Talking to banks and lenders (to get some money to buy businesses)
  • Figuring out what next to research
  • Meeting with associates and VPs to review research done
  • Getting more investors to invest in the fund
  • Handling investor relations

VPs and Associates

A quick disclaimer before diving into this section. VP and associate are two different job titles that require different tasks. The only reason that I’m bucketing them together is that I work at a pretty small firm with 1 VP and 1 associate and I’m not observant enough to be able to recognize major differences between the roles.

Some tasks that both might handle are:

  • Calling experts in fields to gain insight into whether a business is a good buy or not
  • Finding new deal opportunities through brokers or through outreach
  • Managing the analysts/interns
  • Creating financial models for deals
  • Doing market research
  • Analyzing a businesses sales efforts, customers, and projects

Research Analysts

Research analysts are typically going to be taking orders from the VPs and associates. One difference that I’ve noted is that VPs and associates almost “own” deals, whereas a research analyst usually does work for many. For example, the VP might be in charge of a candy store deal that’s happening. And the associate might be in charge of a rental truck deal. They’ll then both tell the research analyst to do market sizing for both of them and so the analyst will have workstreams on both the deals.

Some tasks that a research analyst might do are:

  • Building expert lists to potentially reach out to
  • Finding out the market size for a certain business’s industry
  • Analyzing the data that businesses provide
  • Researching the risks of investing in a certain sector
  • Occasionally building the odd financial model
  • Researching a businesses competitors

A Day in the Life of a Research Analyst

person holding blue and clear ballpoint pen; What does a private equity analyst do?
What does a private equity analyst do?

Now that you sort of understand the various moving parts of private equity, we can dive into what my day looks like.

Usually I’ll get the office at 9am and there will be a morning meeting. In this meeting the partners will lay out what they want to know about certain companies and where the priority should be.

That’s about where the consistency in my day ends though. Depending on what deals are going on and what stage we’re at in each deal, I could be on any number of tasks. One thing is for certain though, I always have Slack and Outlook open.

Usually, the research analyst tasks laid out above^ require a ton of googling. So my day is mostly filled with punching in various keyword combinations into Google until I find what I’m looking for. Example: maybe we’re looking to buy a Southern candy business and I need to find out how many jolly ranchers are sold in Texas. Google, here I come:

  • Search 1: “number of jolly ranchers in Texas”
  • Search 2: “jolly rancher sales Texas”
  • Search 3: “jolly rancher state report USA”
  • Search 4: “how much candy was sold in Texas in 2020”
  • Search 5: “total jolly rancher sales”
  • Search 6: ……..

You get the point. But googling isn’t all that I do. I also spend a ton of time in Excel. Whether I’m building a model (a rare but appreciated task), jotting down information from expert calls, or building a list of potential companies to buy, Excel is truly my best friend.

Then, once a week, the whole team gets together and I’ll share the research I’ve done, receive feedback, and get next steps.

Day Summary

All in all, that’s typically what a day looks like for me and I usually head out of the office by 5pm (although I might occasionally stay late if I’m really into a task).

One thing that I’ve noticed is that I’m given lots of creative license as to HOW I get stuff done. For example, the associate doesn’t really care HOW I figure out how many jolly ranchers are sold in Texas, he just wants to know the number.

What this means is that I’ve been able to get creative with finding certain things out. Earlier in my tenure, I actually built a program with Python that helped with pulling information from online. It saved me a ton of work and freed up time to do other interesting things.

My Thoughts on Private Equity

All in all, I love my experience working in PE. I am truly never doing the same thing on any given day, and I feel like I’m expanding my knowledge the longer I work. Also, the people I hang around are super smart.

The two jobs I’ve had before this were:

  1. Being a caddie at a local golf club
  2. Being a host at a local restaurant

As a caddie, I was carrying the same bags around the same golf course and didn’t really have much intellectual stimulation or diversity in tasks. I mean, how much can you really jazz up lugging a bag around? As a host, it got to the point where I didn’t need to even think about my conversations as I led guests into the restaurant. I loved talking to people, but the interactions were usually the same and I didn’t feel like I was growing much.

In private equity, though, I’m constantly assigned to different tasks. I might be pulling industry reports one second, building a program the next, and then listening in on a management call just as soon. Plus, everything is super fast-paced. The associate and VP are patient and really good teachers, but they also have their own tasks to do, so it’s my job to learn quickly.

Being in private equity gives me enough structure that I can learn and grow, but also enough creativity that I can thoroughly enjoy my tasks and maximize my output. I highly recommend you take a look at private equity if you are interested in finance.

Final Thoughts

grassy fields near river and trees in countryside; What does a private equity analyst do?
What does a private equity analyst do?

There it is: a day in the life of a private equity research analyst. Hopefully, all of you wondering “what does a private equity analyst do?” have had your questions answered. If you’re still curious about PE or my experiences, feel free to reach me on the contact page or through any means of social media.

Clearly, I had a good experience so I might be biased, but I truly think that you’re going to get out whatever you put into a job. Good luck with your own jobs and happy wealth building!

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Thanks for reading through a day in the life of a PE analyst and thank you for following along! If you’re a Canadian Student, check out the Ultimate Canadian Student’s Guide to Personal Finance! To learn more about me, head over to this link here. If you want to get exclusive updates and tips, drop your email in the “get updates” box (might have to scroll up a bit.) Let me know your thoughts and suggestions in the comments!