A private equity company takes a stake in a business that is not listed publicly and seeks to turn the company around or to grow it. Private equity firms usually raise funds in the form of an investment fund with a defined structure and distribution system, and then they invest the funds into the target companies. Limited Partners are the investors in the fund. Meanwhile, the private equity firm is the General Partner, accountable for buying or selling the fund and overseeing the funds.
PE firms are often accused of being ruthless and seeking profits at all cost, but they have extensive management experience that enables them to increase value of portfolio companies through improving operations and other functions. For example, they can guide new executive teams through the best practices in financial and corporate strategy and help implement more efficient accounting, procurement, and IT processes to cut costs. They also can find operational efficiencies and boost revenues, which is one method to increase the value of visit site their investments.
In contrast to stock investments, which can be converted in a matter of minutes to cash and cash, private equity funds generally require a large sum of money and may take years before they are able to sell their target companies at a profit. This is why the industry is extremely illiquid.
Working at a private equity firm usually requires previous experience in finance or banking. Associate entry-levels focus on due diligence and financing, whereas junior and senior associates are focused on the relationship between the firm and its clients. In recent years, compensation for these roles has increased.