How to Transition From Law to Private Equity

If you’re a legal professional looking to pivot into the private equity industry, this guide will walk you through everything you need to know. We’ll talk through

the essential steps and skills needed to navigate this change successfully. Whether you’re drawn to the strategic aspects of investment, the thrill of deal-making, the intricacies of acquisition, or something else entirely, our goal is to provide practical advice and insights grounded in expertise from industry experts.

What is Private Equity?

Private equity is a type of investment in which investors provide capital to companies that are not publicly traded on the stock market. Private equity firms use this capital to acquire ownership stakes in these companies. They typically aim to improve the performance and value of these companies over time before eventually selling them for a profit.

Private equity investments can involve various strategies, such as buying entire companies (leveraged buyouts), investing in growth-stage companies, or providing capital for restructuring or expansion. The ultimate objective of private equity investors is to enhance the value of their portfolio companies and exit their investments at a profit, typically through an initial public offering (IPO), sale to another company, or recapitalization.

Why Lawyers Transition Into Private Equity

It’s no secret that transitioning from law to private equity offers lawyers a pathway to leverage their diverse skill sets and legal expertise in a new arena of investment. With experience in contract negotiation, corporate finance, and due diligence, lawyers possess valuable competencies applicable to various facets of private equity transactions, including acquisitions, deal structuring, and investment management. Their proficiency in drafting and interpreting legal documents equips them to analyze and negotiate deal terms effectively.

Additionally, lawyers bring a unique perspective to private equity, enabling them to identify and address legal risks inherent in investments, particularly in industries with intricate regulatory landscapes like healthcare and energy. By navigating these complexities adeptly, lawyers-turned-private equity professionals contribute to the success of investments while safeguarding the interests of the firm and its stakeholders.

Read: 5 Things to Know Before Entering Private Equity

Types of Roles for Lawyers in PE

The route from law to private equity typically follows one of two paths. First, the legal route – continuing to practice law but specializing in finance tasks. This may include deal structuring, acquisition advising, public offerings, SPACs, portfolio company representation, tax/regulatory services, and more. Second, the investing route – moving away from the actual practice of law but continuing to leverage legal knowledge to inform deal-making and other strategies for success.

Making the jump from practicing lawyer to investment professional can be tricky, especially for those with more work experience. However, with the right strategy, mindset, and support, it can be done. The path that’s right for you will depend on the target fund, law firm, experience, degree, background, and other factors. We’ll go through general best practices, but we highly recommend talking with an expert for personalized guidance.

Transferable Skills Lawyers Can Use When Transitioning to Private Equity

Lawyers possess several transferable skills that are valuable when transitioning to the private equity industry.

1. Legal Analysis and Research: Lawyers are trained to analyze complex legal issues, conduct thorough research, and apply relevant laws and regulations to specific situations. These skills are essential for evaluating investment opportunities, conducting due diligence, and assessing legal risks associated with potential deals in private equity.
2. Contract Negotiation: Negotiating contracts is a fundamental aspect of legal practice, and lawyers excel in understanding, drafting, and negotiating complex legal agreements. In private equity, this skill is crucial for structuring deals, negotiating terms with stakeholders, and finalizing agreements with target companies.
3. Financial Acumen: While lawyers may not have formal training in finance, many develop a strong understanding of financial concepts through their work on corporate transactions, mergers and acquisitions, and securities offerings. This financial acumen is valuable in private equity for analyzing financial statements, assessing company valuations, and evaluating investment opportunities.
4. Due Diligence: Lawyers are skilled at conducting due diligence to uncover potential legal risks and liabilities associated with a transaction. In private equity, due diligence involves assessing various aspects of a target company, including its financial performance, operational capabilities, market position, and legal compliance. Lawyers can leverage their due diligence experience to identify key issues and make informed investment decisions.
5. Communication and Presentation: Lawyers are effective communicators, adept at articulating complex legal concepts, negotiating with counterparties, and advocating for their clients. These communication skills are essential in private equity for presenting investment proposals, engaging with management teams, and communicating with investors and other stakeholders.

What Are the Skills Required for Private Equity?

5 Key Skills You Need for Private Equity

While legal experience is valuable in private equity firms, it’s likely that you will need additional skills to succeed in this field. These include:

1. Financial modeling
2. Accounting/analytics
3. Negotiation
4. Valuation skills
5. Industry knowledge and market trends

Let’s break these down further.

Financial Modeling: This involves creating abstract representations (models) of a real-world financial situation. These models are used to estimate the economic performance of a potential investment and predict its future revenues, expenses, and cash flow. Mastery of financial modeling allows private equity professionals to make informed decisions and forecasts, evaluate investment strategies, and present findings to stakeholders.

Accounting/Analytics: Accounting and analytics are important for understanding financial statements and performance metrics. Investment professionals need to be able to look critically at balance sheets, income statements, and cash flow statements to assess a company’s financial health and operational efficiency. This capability enables private equity specialists to identify potential risks and opportunities, ensuring the viability and profitability of their investments.

Negotiation: PE operators frequently deal with the acquisition and sale of companies and the forming of partnerships with investors and stakeholders. Effective negotiation skills help in achieving favorable deal terms, resolving conflicts, and securing agreements that benefit all parties involved. A strong negotiator must be adept at communication, persuasion, and strategic compromise.

Valuation: This involves determining the present value of an asset or company. Private equity professionals must be proficient in various valuation techniques like discounted cash flow (DCF), comparables analysis, and precedent transactions. These skills are vital for making decisions about which companies to invest in, at what price, and the best time to exit the investment to maximize returns.

Industry Knowledge/Market Trends: Deep industry knowledge and an understanding of market trends are crucial as professionals in this field need to stay informed about the sectors in which they invest, including technological advancements, regulatory changes, and market dynamics. This insight allows them to spot emerging opportunities, understand the competitive landscape, and anticipate changes that could impact their investment decisions.

Okay – But, How Do You Actually Make the Transition?

Depending on your background, experience, and goals, this path will look different. Make adjustments depending on your needs and trajectory.

1. Start gaining relevant experience

While legal expertise is crucial, understanding the business and financial implications of private equity transactions is equally important. Enhance your financial literacy by taking courses or earning certifications in financial modeling and analysis. There is a lot of free information available online, and you can also work with a coach for custom interview prep and skill development.

For aspiring PE lawyers, get experience working with areas of law that are relevant to private equity – for example, mergers and acquisitions, corporate finance, securities, and tax law. Whether it’s through specific projects at your current firm, or moving into a corporate law position, starting to understand the environment, players, and needs of finance professionals will support your transition preparation.

2. Network with industry professionals

Build as many relationships as you can with professionals in the PE sector. Attend conferences, join groups, use existing connections, and connect on platforms like LinkedIn. This is particularly important for experienced professionals who aspire to more senior positions.

3. Look for opportunities within your firm

If you’re working in a law firm that advises private equity clients, express your interest in working more closely with these clients. Alternatively, if your firm has a history of placing lawyers into clients' firms, discuss your career aspirations with your mentors or the applicable department.

4. Craft a strong, tailored resume

Transitioning from law to private equity involves a shift in career focus and skill set. A polished resume highlights the right skills, demonstrates your industry knowledge, and helps in networking. It’s important that your resume accurately reflects the story of where you’ve been and where you’re going. Use our career resume guide below to make sure you have the strongest resume possible.

5. Make sure you can nail the interview

When interviewing for private equity jobs, it’s important to come prepared with well-thought-out responses to common interview questions. Researching the firm’s culture, investment philosophy, and portfolio companies can give you an edge in the interview process. Additionally, highlighting your legal experience and any relevant industry-specific knowledge can help make you a more appealing candidate for the position.

When coming from a non-finance background, it’s important to show a complete understanding of the basics (listed above): financial modeling, accounting basics, valuation, industry trends, etc. You’ll be going up against people with experience in these fields – match the mastery of the basics, then differentiate by focusing on what you uniquely bring to the table.

Break Into Private Equity With the Help of an Expert

The best way to give yourself the greatest chance of recruiting success is to work with an expert with deep industry knowledge who can evaluate your candidacy and help you improve. Below are some popular coaches, browse all here.

Frequently Asked Questions

What skills are essential for a lawyer transitioning to private equity?

• To transition successfully from law to private equity, you should develop financial modeling, accounting and analytical skills, negotiation capabilities, valuation expertise, and a deep understanding of industry-specific knowledge and market trends. These skills complement your legal expertise and are crucial for analyzing investments and managing transactions.

How can a lawyer gain relevant experience for a role in private equity?

• Lawyers can gain relevant experience by focusing on legal areas such as mergers and acquisitions, corporate finance, securities, and tax law. Gaining practical experience through roles in these areas within a law firm, or seeking internships or secondments in private equity firms, can provide valuable insights and skills pertinent to private equity.

Are there specific educational qualifications that benefit lawyers entering private equity?

• While legal qualifications are fundamental, additional qualifications like an MBA or a CFA can be highly beneficial. These programs offer deep dives into financial analysis, investment strategies, and economic understanding, which are crucial for a career in private equity.

How important is networking in transitioning from law to private equity?

• Networking is vital in the transition from law to private equity. Building relationships with private equity professionals, attending industry conferences, and joining relevant online forums can help in gaining industry insights, finding mentorship, and uncovering job opportunities.

What role do lawyers typically play in a private equity firm?

• In private equity firms, lawyers often handle transaction structuring and execution, ensure compliance with legal and regulatory requirements, manage risk, and advise on the legal implications of investment decisions and strategies. As in-house counsel, they are integral to the smooth operation and strategic decision-making of the firm.

Can a lawyer transition directly to an investment role in private equity?

• Yes, it's possible for lawyers to transition directly to investment roles in private equity, though it typically requires significant preparation. This includes acquiring strong financial and market analysis skills, gaining investment-related experience, and demonstrating the ability to apply a legal perspective to investment decision-making and strategy.

What challenges might lawyers face when transitioning to private equity?

• Lawyers might face challenges such as developing sufficient financial acumen, understanding the intricacies of private equity deal structures, adapting to a fast-paced investment environment, and transitioning from a purely advisory role to one that requires direct investment decision-making.

How can I showcase my skills to potential private equity employers?

• Tailor your resume and cover letters to highlight transferable skills such as negotiation, contract analysis, and risk management. Additionally, demonstrate your understanding of financial concepts and investment strategies through certifications, coursework, or practical experience. Networking and informational interviews can also provide opportunities to showcase your knowledge and enthusiasm for the field.

How hard is it to break into private equity?

• Breaking into private equity can be challenging due to the competitive nature of the field and the specific skills and experience required. The industry highly values candidates with a strong background in finance, proven analytical capabilities, and experience with investments. For lawyers, the transition might involve additional steps such as acquiring financial qualifications or gaining relevant investment experience. Networking, continued education, and strategic career moves are essential for increasing your visibility and attractiveness to potential private equity employers.

What is a private equity lawyer's salary?

• The salary of a private equity lawyer can vary widely depending on factors such as geographic location, the size of the private equity firm, and the individual's level of experience and expertise. Generally, private equity lawyers are well-compensated due to the complexity of the transactions and the high stakes involved. In major financial markets, experienced private equity lawyers can expect salaries ranging from the upper six figures to over a million dollars annually, including base salary, bonuses, and profit-sharing opportunities. Entry-level positions in smaller markets or firms offer lower, yet still competitive, salaries.

What is private equity law?

• Private equity law involves the legal aspects of activities related to investments in private equity. This includes the structuring and management of private equity funds, regulatory compliance, transaction execution, and managing investments in private companies or buyouts of public companies. Lawyers specializing in this field deal with agreements, transaction structuring, negotiations, due diligence processes, and the legal framework governing investments. They ensure that all activities align with current laws and regulations, providing critical support that enables private equity firms to make informed, legally sound investment decisions.

Read these next:

• 10 Essential Steps to Getting Into Private Equity
• Private Equity Jargon: Terms to Know
• The 5 Most Prestigious Private Equity Firms