A private equity firm buys a stake in a business that is not publicly listed and then is able to turn the business around or grow it. Private equity firms typically raise funds through an investment fund with an established structure and distribution system and then put that money into the companies they want to invest in. Limited Partners are the investors in the fund, and the private equity firm is the General Partner responsible for purchasing, selling, and managing the targets.

PE firms are sometimes criticised for being ruthless in their pursuit of profits However, they typically possess a wealth of management expertise that allows them to increase the value of portfolio companies by implementing operations and other support functions. They could, for example, guide a new executive team through the best practices in financial and corporate strategy and assist in the implementation of more efficient accounting, IT and procurement systems to lower costs. They can also identify operational efficiencies and boost revenues, which is one way they can increase the value of their holdings.

Unlike stock investments which can be converted quickly into cash Private equity funds typically require a lot of money and can take years before they can sell a target company for profit. This is why the sector is illiquid.

Working for a private equity firm typically requires previous experience in finance or banking. Associate associates at entry-level work mostly on due diligence https://partechsf.com/generated-post-2/ and financing, while junior and senior associates are focused on the relationship between the firm and its clients. Compensation for these roles has been on an upward trend in recent years.