Why South African Private Equity Firms Are Increasingly Hiring Consultants for Their Investment Teams

South African private equity firms have traditionally favoured investment bankers for associate roles due to their expertise in transaction-heavy tasks like pipeline development, deal execution, and LBO (leveraged buy-out) modelling. This skill set has been particularly relevant in key sectors such as mining, natural resources, energy, and financial services, which are essential to the South African economy.

As part of our series, "Unlocking Opportunities Beyond Management Consulting—Insights from SA's Talent Acquisition Experts," we explore strategies for identifying and capitalising on exit opportunities from consulting. One notable trend is the growing transition of consultants into private equity, a sector increasingly open to professionals with consulting backgrounds.

Many private equity firms recognise the unique value consultants bring to their investment teams. With strengths in strategic due diligence, advanced analytical capabilities, landscape analysis, and post-merger integration, consultants complement the transactional focus of investment bankers. This synergy offers a more comprehensive approach to deal-making and portfolio management.

This evolution is particularly beneficial in sectors like fintech, renewable energy, and healthcare, where operational complexity demands ongoing strategic input and effective management. By integrating both investment bankers and consultants into associate roles, firms can differentiate themselves and enhance their strategies for operational improvements and long-term value creation.

Hybrid Roles in Private Equity

An emerging trend in South African private equity is the hybrid role, where associates divide their time between investments and portfolio management. This structure leverages consultants' problem-solving abilities and strategic insights to manage portfolio companies post-acquisition. Depending on the firm's needs, consultants may spend up to 50% of their time on portfolio management, particularly in industries requiring continuous operational improvements, such as renewable energy.

In larger firms, dedicated portfolio operations teams are also emerging, separating investment tasks from portfolio management entirely. This setup allows consultants to focus on enhancing the performance of portfolio companies, while investment bankers concentrate on deal execution.

When Should South African Consultants Move to Private Equity?

South African private equity firms generally seek consultants early in their careers, typically with 1 - 3 years of experience. These consultants often have direct exposure to commercial due diligence and possess strong commercial instincts, making them ideal candidates for private equity associate roles. At this stage, they remain hands-on with rigorous analytics and problem-solving - skills that translate well to private equity.

However, consultants with over three years of experience often shift towards leadership and project management, which are less relevant for associate roles. For those looking to transition, moving earlier in their careers increases the likelihood of successfully adapting to private equity's fast-paced, analytical environment.

Attracting and Onboarding Consulting Talent

To attract consultants to their investment teams, South African private equity firms need to adapt their recruitment processes. While consultants bring valuable strategic thinking and problem-solving skills, their expertise differs from investment bankers. Firms should focus interviews on assessing strategic thinking, commercial instincts, and cultural fit to prepare candidates for private equity demands.

While some firms may still seek financial modelling skills similar to those of bankers, many prioritise a candidate's strategic capabilities. Any skills gaps can be addressed through in-house training, internships, or external programmes to help consultants transition to areas like LBO modelling. Clearly communicating expectations during the interview process will ensure candidates understand the skills needed for success in private equity.

The Future of Consultants in South African Private Equity

The evolving consulting landscape in South Africa is prompting more professionals to view private equity as a viable exit opportunity. In turn, private equity firms increasingly acknowledge the value consultants bring to their associate ranks. While investment bankers will remain a core part of these teams, the hybrid approach of blending consulting and banking expertise is proving effective for many firms.

This trend is expected to grow as more South African private equity firms recognise the operational and strategic benefits consultants can offer. By diversifying their talent pool, these firms can better navigate the complexities of deal-making and operational management, positioning themselves for success in South Africa's dynamic private equity market.

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