Private Equity in UK

Private Equity in the UK refers to the sector that consists of companies that manage private equity funds in the nation. Private equity is defined as a collective investment financial instrument that deals with and makes investments in private companies on behalf of investors or other entities. The sector is predicted to grow over time after it has faced and overcome the pandemic hit.

Private equity in the UK is the industry that is expected to grow at a compound annual rate of 11.8%, given the growth accounting to be worth £4.6 billion in 2022-23. Private equity firms in the UK and the world generate revenue through management fees that they charge from investors for their investment services.

Private equity in the UK is the sector that has seen a lot of ups and downs over the last five years, including the COVID period. Though they have witnessed an adverse fall at one point in time, especially during COVID, the UK mid-market firms recorded investing £46 billion in 2022, which was 12% lower than in 2021, but 13% more than pre-pandemic period.

The wimping out of these firms in terms of investment deals made it difficult for start-ups to expand their base and make their mark. This, in turn, affected the entire economy negatively.

In 2016, the number of equity investments was curtailed by 18% compared to the previous year. Compared to the 1460 deals in 2015, in 2016, the number of deals was just 1203.

Even in 2014, the investment deals in the UK have been drastically reduced. Compared to the 1473 deals in 2013, in 2014, the investment deals that reached their fruition were just 1349.

While things are looking dim and apprehensions of the future loom large, there is good news. Though this has nothing to do with private equity, the start-ups in the UK are still being saved for this. Instead of going for a similar route, start-ups are looking for crowd-funding options to help them create immediate cash flow for their operations/expansion.

According to the research done by Preqin (as of June 2016), it was found that 81% of all UK fund managers are located in London and collectively raised 302 billion Euros, which happens to be 96% of all capital that has been raised in the last ten years.

The private equity firms in the UK have begun offering low interest rates over the past decade and it continues to follow the same environment. This is because the lower rates reflect the easy availability and accessibility of funds, which ultimately helps startups and small companies raise funds for expansion and growth. These firms understand that higher interest rates would make obtaining funds tough for entities, thereby slowing down the economy.

Private Equity in the UK provides three services to its clients; let’s investigate what those three fundamental services are –

• Initial Public Offering (IPO): Private equity firms provide funds for private companies and companies that want to go public. And to go for an IPO is a hugely expensive task. Where would the money come from? Private Equity firms would be at your rescue. Along with IPO funding, private equity firms also sell additional shares to the public.
• Merger & Acquisition (M&A): If two companies decide to club and combine and make a stew of their competitive advantages by creating synergies, Private Equity in the UK will help them make things happen. They help one company get sold to another company instead of cash or shares.
• Recapitalization: When there is a need to recapitalize, private equity firms in the UK help the companies get funded either by cash or means or by raising debts.

Irrespective of the economic crash down and downturn of the market, few companies always do well. And that’s what happened in the private equity market in the UK. Few top companies did well in terms of aggregate capital raised.

Let us now look at the list of top private equity firms as of 2023 –

1. 3i Group: It is one of the largest listed London-based private equity firms in the UK. It usually deals with making investments in technology and business sectors along with consumer goods, and healthcare firms. The company usually invests in firms with enterprise value worth between €100 million and €500 million. The investment figure is between €5 million to €300 million.
2. Espiris: It is yet another major player in the private equity market in the UK. It has invested more than GBP 1.6 billion in more than 20 companies since its emergence in 2011. The most recent investment activity that it carried out was in collaboration with Astorg whereby the firm placed a bid to take over financial publisher Euromoney Institutional Investor worth GBP 1.7 billion in July 2022.
3. OMERS: Being the arm of the Pension Plan of the Province of Ontario, Canada, this firm also has its presence in London as an active investor in the region. OMERS possesses assets worth $19.8 billion and takes part in investments concerning healthcare, industrial, services, and technology niches.
4. CVC Capital Partners: CVC Capital Partners took the first spot and raised around 32.1 billion Euros.
5. Apax Partners: Apax Partners were in the second position raising around 18.1 billion Euros.
6. Permira: On the third spot is Permira, which raised around 16.4 billion Euros.
7. Coller Capital: Coller Capital was in the fourth spot and raised 14.6 billion Euros.
8. Charterhouse Capital Partners: Charterhouse Capital Partners raised over 9.5 billion Euros and stood 7th in aggregate.
9. Intermediate Capital Group: After raising around 9.3 billion Euros in aggregate, Intermediate Capital Group stood 8th.
10. Bridgepoint: Bridgepoint raised around 8.8 billion Euros in aggregate and took 9th.

If one wants to work in a great company, they can choose any of the above, and work their way up to the top. But, first, let’s have a look at the recruitment process.

First, let’s go through some statistics to understand how it is in the UK.

Every top private equity firm receives around 250-300 applications for every entry-level position. Out of 300 applications, only 30 are called for an initial round. Out of 30, only ten are called for the first round of interviews. And after the first round, only 2-3 are called for the last round.

So, if you have been given a call from reputed private equity for an interview, something is special in you.

Let’s see the process of recruitment –

Online applications:

It would be best if you started by submitting online applications. However, make sure that you do it with sincerity because only 10% of applications are shortlisted and asked for the first fitment interview.

An initial round of interviews:

Recruitment agencies usually take the initial round of interviews. They need to see whether you are fit for the job. They will ask you questions like –

• Why do you want to work for this firm?
• Why do you think private equity is a good fit?
• Walk me through your resume;
• Tell me something about yourself etc.

Second round (usually first round at PE firm):

You may have honed your interview skills, but this round is the toughest; because this will test your skills and expose you to the interview panel completely. In addition, you need to give a case presentation in this round, and the stipulated time will be limited. And after that, you need to go through a skill test of financial modeling basics, which is by no means an easy nut to crack. So if you ever want to prepare for an interview, prepare for this round because only the best will get through this round.

Next round:

Once you are through the second round, there will be another test. It wouldn’t be like an interview, but the PE firm would like to know whether you’re a culture fit or not. So, they will take you out on lunch with senior team members. And they will judge you whether you are a good team player, can face their clients, how you approach the work, and so on. So, the whole thing would be pretty informal.

Final Round:

If everything goes well, it’s time to face the partners and HR. A 7-10 people panel will interview you, and you will be asked vital questions to see whether you are a hit or a miss. Very few candidates reach this level. Usually, 2-3 candidates are selected for this final round. And the best is chosen for the job after this.

Culture is usually like New York. You need to work hard and be diligent about all the financial models you build. It would help if you were very particular about the financial models because these are not ordinary models; instead, these models need in-depth attention and a detailed approach.

Depending on your working funds, your work hours would be proportionate. If you’re working on smaller funds, you will enjoy a great work-life balance and, as a result, will earn less. But if you dream of earning big bucks, work on bigger funds; the only side effect is long hours, all-day work, and no work-life balance.

In the beginning, you will build many models; but later, you need to depend on them and work on something else. For example, you may need to call many prospects each week to see what your firm can buy.

However, the PE environment is much better than investment banking. And you won’t go after only “deals”; rather, your job is to find “great deals” until you need to work and find out which will be better for the company.

London is the hub of top private equity in the UK. And every top-notch firm wants the best talents. As a result, recently, they have begun to increase the salaries of even junior players.

The issue is not in attracting talent. Many people are there to join top PE firms, but the best talents are few, and every top-notch firm wants the best. Moreover, every PE firm wants to go beyond the competition with the investment banks and wants to end the question mark on PE salaries.

According to Kea Consultants, private equity firms have increased the salaries of junior employees by 20% in the last 12 months.

An associate in a top private equity firm earns a basic salary of 75,000 UK Pounds (the US $98,000) to 100,000 UK Pounds (the US $130,000) per annum. And as per the Kea Consultants, this is a 10% increase compared to the salary offered in the previous year.

Even bonuses are a big plus. Associates earn around 56,000 UK Pounds (US $72,300) to 102,000 UK Pounds (US $131,700) per annum as bonuses. If we look at the average, it’s stunning, around 71,000 UK Pounds (the US $91,700) to 84,000 UK Pounds (US $108,500) per annum.

That means an associate in a top private equity firm earns around 150,000 UK Pounds (the US $190,000) per annum.

Here’s the graph to illustrate the salary structure in mega private equity in the UK –

source: efinancialcareers.com

Two things are important here.

People who join private equity firms in the UK in their early twenties usually switch to something else. And people who join private equity firms in their early thirties don’t seem to switch careers because they have already done so.

So if you would like to switch careers from private equity, what would you do? There are many options, and it’s up to you to choose which one is right for you.

The usual answer is to move to hedge funds where money can be made rapidly. If not, hedge funds, you can become a venture capitalist who concentrates mainly on start-ups. You also have options for going back to the financial advisory. Or else, you can start your fund or own firm. Or you can join a portfolio company.

The question is why you would like to switch in the first place! The answer can be an easy launchpad for starting where you would like to move toward.

This article has been a Guide to Private Equity in UK and its overview. We explain it with the services offered, top 10 PE firms in UK, salary, and recruitment process. You may also have a look at the following article for learning more about Private Equity

• Private Equity in Germany
• Private Equity Requirement in India
• Brazil Private Equity
• Mexico Private Equity
• Private Equity in China