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Business Development – The New Wave In Private Equity

Business Development – The New Wave in Private Equity

Throughout the past 5+ years, the private equity landscape has changed significantly with the billions of dollars in dry powder and the rise of 100s of new PE firms; a new career path within the space has also emerged – business development professionals. From an industry that has almost exclusively been focused on executing investment opportunities and performing due diligence, the firms that have taken a relationship-focused approach have been able to differentiate themselves from the noise.
Business development in private equity can mean different things depending on the part of the market certain firms operate in, but at the end of the day, the goal is to bring in actionable investment opportunities. Some firms take the approach of making sure they have strong relationships with intermediaries which are mostly investment bankers but can also include lawyers, accountants, wealth managers, and so on. On the lower end of the middle market, many firms are focused on proprietary sourcing – reaching out to founders and CEOs to build rapport and convince them that your firm is the right partner for them. These relationships can become very important when a management team decides to go out to market as the sales cycles can be over multiple years.

Many investment professionals in the years past have spent their days doing both the sourcing and the execution, but with the market getting more competitive the functions within these firms have become more siloed. The BD professional lives on their phone and email, most of their days revolve around calls with executives, bankers, and internal deal teams – the industry is extremely time-sensitive and fast-moving. Face-to-face interaction is tremendously important in this industry as well, so in normal times conferences and other industry events are must-attends for firms. Some firms are generalists in nature where they will take a run at any company in any industry, but others tend to focus on specific verticals such as healthcare or enterprise software where their BD team may spend a lot of their time researching the market and helping craft out investment theses.

The types of individuals that find success in a business development role typically have a few common attributes. The first (and maybe least surprising) is strong interpersonal skills and the ability to build long-lasting relationships with a variety of personalities and decision-makers. The next one is having hunger and a sales-oriented mentality as a lot of times firms do adhere to specific metrics and goals over time. Another one that I have personally found to be important is the ability to not being discouraged from failing – you will hear a lot of nos for every yes and the individuals that keep their heads up will usually be in a much better position to succeed. Of course, there are many additional factors that may help you be successful in a role like this, but these are a few I have learned along the way.

Since this is a newer career path the background of potential candidates is not clearly defined. Most firms love for a candidate to have prior expertise in working within a BD capacity at another private equity shop, but this in no way is a must-have. Many other firms have hired individuals from investment banks, consulting firms, third-party expert networks (e.g. GLG or AlphaSights), venture capital firms, real estate, wealth management, software companies, or even any type of sales-facing role. Some firms have designated programs, but many firms would prefer individuals to stick around for the long-term and will provide partner/managing director trajectories.

Many firms today still are behind the curve at building out this function within their organization, which is leading to a significant opportunity for aspiring business development professionals. For those that believe they can add value to a firm’s BD arm, this career path should be one to consider as we are still in the early innings of this new wave.

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