A private equity firm takes an ownership stake in a company that is not publicly listed and attempts to turn the company around or to grow it. Private equity firms raise money by way of an investment fund with a defined structure, distribution waterfall, and then invest it in the companies they wish to look here invest in. The investors in the fund are known as Limited Partners, and the private equity firm acts as the General Partner in charge of buying, managing, and selling the targets to maximize returns on the fund.
PE firms are sometimes critiqued for being uncompromising in their pursuit of profit however, they usually have extensive management expertise that allows them increase the value of portfolio companies through operations and other support functions. They can, for instance, guide a new executive team through the best practices in corporate strategy and financial planning and help implement streamlined accounting, IT and procurement systems that reduce costs. They can also find ways to improve efficiency and increase revenues, which is one method to improve the value of their assets.
Private equity funds require millions of dollars to invest and they can take years to sell a business in a profit. As a result, the industry is highly illiquid.
Private equity firms require previous experience in finance or banking. Associate entry-level associates are responsible for due diligence and financials, while senior and junior associates are responsible for the relationships between the clients of the firm and the firm. Compensation for these positions has been on a rising trend in recent years.
