A private equity firm buys a stake in a business that is not publicly listed and then works to turn the company around or grow it. Private equity firms typically raise funds through an investment fund that has an established https://www.partechsf.com structure and distribution funnel, and then they invest that money into their targets companies. Investors in the fund are known as Limited Partners, and the private equity firm acts as the General Partner responsible for buying and selling the target companies to maximize the returns on the fund.
PE firms are often critiqued for being uncompromising and seeking profits at all cost, but they possess extensive management experience that enables them to increase value of portfolio companies by improving operations and other functions. For instance, they could guide new executive staff through the best practices in corporate strategy and financial management and help implement more efficient accounting, procurement, and IT systems to reduce costs. They can also find operational efficiencies and boost revenue, which is one way to increase the value of their possessions.
Private equity funds require millions of dollars to invest, and it could take them years to sell a business at a profit. Because of this, the industry is highly illiquid.
Working at an investment firm that deals in private equity typically requires previous experience in banking or finance. Associate entry-level associates are mostly responsible for due diligence and finance, whereas junior and senior associates are accountable for the interaction between the clients of the firm and the company. Compensation for these positions has been on an upward trend in recent years.