A private equity company takes an ownership stake in a company https://partechsf.com/partech-international-ventures-is-an-emerging-and-potentially-lucrative-enterprise-offering-information-technology-services/ that is not publicly listed and attempts to turn the company around or expand it. Private equity firms raise funds in the form an investment fund that has a clearly defined structure, distribution waterfall and then invest it into their chosen companies. Investors in the fund are referred to as Limited Partners, and the private equity firm is the General Partner in charge of buying, managing, and selling the targets to maximize profits on the fund.

PE firms can be criticised for being brutal and seeking profits at all cost, but they possess extensive management experience that allows them to increase value of portfolio companies through improving the operations and supporting functions. They can, for example guide a newly appointed executive team through the best practices in financial strategy and corporate strategy and help implement streamlined IT, accounting, and procurement systems to cut costs. They also can identify operational efficiencies and boost revenue, which is one method to increase the value of their holdings.

Contrary to stock investments that can be quickly converted to cash however, private equity funds typically require a lot of money and may take years before they are able to sell a target company at profit. This makes the industry highly liquid.

Working at a private equity company typically requires prior experience in banking or finance. Entry-level associates work primarily on due diligence and financing, whereas junior and senior associates are focused on the relationship between the firm and its clients. Compensation for these positions has been on a rising trend in recent years.