A private equity firm takes the ownership of a business that isn’t listed publicly and works to turn the company around or grow it. Private equity firms typically raise funds through an investment fund that has a clearly defined structure and distribution plan, and then they invest that money into their targets companies. Investors in the fund are known as Limited Partners, and the private equity firm serves as the General Partner responsible for purchasing, managing, and selling the target companies to maximize the returns on the fund.

PE firms are often criticised for being ruthless in their pursuit of profits, but they often have a vast management experience which allows them to enhance the value of portfolio companies by implementing operations and other support functions. They can, for instance guide a newly appointed executive team through the best practices in corporate strategy and financial planning and assist in implementing streamlined accounting, IT, and procurement systems that reduce costs. They also can identify operational efficiencies https://partechsf.com/generated-post/ and boost revenue, which is one way they can increase the value of their holdings.

Contrary to stock investments that can be converted in a matter of minutes to cash however, private equity funds typically require a lot of money and may take years before they can sell a target company for a profit. In the end, the business is highly inliquid.

Private equity firms require experience in finance or banking. Associate entry-levels focus on due diligence and financing, while junior and senior associates concentrate on the relationship between the firm and its clients. In recent years, compensation for these positions has increased.