Why a job in private equity pays

NEW YORK (CNNMoney.com) -- If you want a job in private equity, you're not alone.

Known for being nimble and lean deal-making machines, private equity firms have always been attractive destinations for top talent. But as the buyout boom takes off, demand has taken on a new fervor.

Thirteen percent of Harvard Business School's 2006 MBA class took jobs in private equity, making it the most popular finance destination, topping even investment banking. At Stanford Graduate School of Business, the percentage of graduating MBA students taking the private equity path has steadily risen since 2002 and rose to nearly one-tenth of the class last year.

Aided by cheap debt, private equity firms have been on a rampage. Last year, buyouts accounted for a fifth of the $4 trillion in deals worldwide. More recently, Blackstone Group triumphed in a fierce takeover battle for Equity Office, resulting in the biggest buyout ever, when debt is included in the value of the deal.

"These funds have raised record amounts of capital and are wielding a lot of power in the M&A market - and power and money, as always, attract people," said Brian Korb, who heads the private equity practice at New York-based executive search firm Glocap.

To be sure, the financial reward for pursuing a career in private equity is sweet. Fresh MBAs at private equity firms saw their total compensation (base salary plus cash bonus) climb 16 percent last year to an average of $289,000, according to Glocap. (How that paycheck stacks up to other industries.)

But private equity firms also offer fresh grads an opportunity to work directly with seasoned talent and shape the future of a company, said Tim Butler, director of MBA career development programs at Harvard Business School.

"In the cases taught in business school, you have a lot of protagonists dealing with high-level issues and making decisions that require analyzing market dynamics - and there are many jobs where [new MBAs] don't get to deal with those issues just yet," he said.

In contrast to the big name Wall Street investment banking firms, which tend to be much larger and have more defined roles at each step of the corporate ladder, many private equity firms offer the equivalent of a small company environment.

Grads going into investment banking have a fairly mapped out idea of what their job will entail and what sorts of projects they'll be working on. "But a private equity shop has much more of an entrepreneurial flair, which appeals to students enormously," said Julie Morton, associate dean for MBA career services at the University of Chicago Graduate School of Business.

It's common for students to flock to hot sectors that may be on the verge of overheating - consider the frenzy of tech hiring in the late 1990s. But private equity houses have been disciplined about building their teams and are known for their streamlined operations - Kohlberg Kravis Roberts, one of the world's largest private equity firms, has only about 90 investment professionals.

"Everyone in the world can want to work for private equity, but the private equity firms are only going to hire who they need," Korb said.

It isn't rare for private equity houses to hire grads fresh out of business school, he said, but 9 times out of 10, the students who nab these jobs are the ones who had private equity experience under their belt before even starting their MBA program.

In the clubby world of private equity, most people usually land their jobs through persistent networking.

"These are highly prized jobs and often the firms don't recruit in large numbers. They're looking for people with very specific experience and may hire just one person a year," said Regina Resnick, assistant dean and managing director for MBA career services at Columbia Business School.

Several schools offer services designed with private equity job seekers in mind. Chicago offers Mocktail, a mock cocktail party, that helps students practice their networking skills in a social setting. At Columbia, a breakfast series allows a small group of students to meet directly with private equity firms and learn more about the business.

The industry is notorious for just-in-time hiring, meaning students in dogged pursuit of these positions may have to sit back and watch their classmates line up jobs elsewhere while they wait for an opening at a private equity firm.

But those who do end up pursuing private equity often see it as a long-term play.

"Private equity tends to be a destination career - many jobs are stepping stones to other jobs, but for students who pursue private equity, this is what they want to do," Harvard's Butler said.

Private equity's PR problem

MBA hiring, pay soaring

Debunking the private equity myth