A private equity firm takes the ownership of a business that isn’t listed publicly and then attempts to turn the company around or increase its size. Private equity firms typically raise funds through an investment fund with a defined structure and distribution funnel and then invest the funds into their target companies. The fund’s investors are known as Limited Partners, and the private equity company is the General Partner responsible for buying and selling the targets to maximize returns on the fund.

PE firms are often criticised for being ruthless in their pursuit of profit, but they often have an extensive management background that allows them increase the value of portfolio companies by implementing operations and other support functions. For instance, they can guide new executive teams through the best practices for corporate strategy and financial management and help implement streamlined accounting procurement, IT, and processes to cut costs. They can also identify operational efficiencies and boost revenue, which is one way to increase the value of their assets.

Private equity funds require millions of dollars to invest and they can https://partechsf.com/partech-international-data-room-do-it-yourself take years to sell a company in a profit. In the end, the industry is highly illiquid.

Working for a private equity company typically requires prior experience in finance or banking. Associate entry-levels are primarily responsible for due diligence and finance, whereas senior and junior associates are accountable for the relationship between the firm’s clients and the firm. Compensation for these roles has been on a rising trend in recent years.