A large component of any Private Equity professional’s total compensation is based off of the percentage of carry they receive once the fund has participated in a capital transaction.  Therefore it is very important for professionals and candidates to understand the average time period that it takes for a fund to close on a deal and then experience a capital transaction with that same investment (Timeline) of Private Equity.

The timeline for Private Equity is constantly changing and is determined by many factors and can vary from fund to fund.  It can also be different depending on whether the fund is transactional or operationally oriented.  Over the last ten years we have seen the average Timeline change drastically and it is presently circling somewhere back to where it was in the mid 90’s before the tech boom.

During the mid 90’s the Timeline for Private Equity was considered by many investors to be at least 18 months long on the low end and in many cases 30-48 months if not more.  This was the same Timeline that had been the norm in the Private Equity investing space for the previous 50 years.

It was during this time that Private Equity was truly a rich man’s game; to work in Private Equity meant that for many years your base salary would be the majority of your income.  You had to be financially secure enough to ride out the Timeline. This could be especially tough if you had not yet received carry from a deal. During this time the only individuals who participated in the carry were usually partners or senior individuals.

As the internet boom started in the late 90’s, the Timeline for Private Equity started to shorten drastically by the height of the boom the Timeline had decreased to an average of 18 months. This decrease was due in large part to the fact that many companies which were not saleable a couple of years earlier were now hot commodities and could be sold for a large premium or placed into the IPO marketplace.

With the shortened Timeline came much larger paychecks on a yearly basis. There became a blurring of Private Equity and Venture Capital investing due to this shortened Timeline and because of this, many professionals were eagerly trying to enter this field

With the implosion of the Internet bubble came a lengthening of the Private Equity Timeline.  Although this lengthening was delayed partially by a new payout structure for Private Equity investments, it still occurred.  Add to the fact that 2008 has started off in a credit crisis this lengthening has continued for the most part and we are now back to the more traditional Private Equity Timeline of 30-48 months.

Tags: candidates, private equity, private equity jobs

This entry was posted on Tuesday, May 13th, 2008 at 2:48 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.