Private equity firms invest in companies that aren’t publicly traded and then attempt to grow or turn them around. Private equity firms usually raise funds in the form of an investment fund with a clearly defined structure and distribution funnel, and then they invest the funds into the target companies. Fund investors are known as Limited Partners, and the private equity firm acts as the General Partner responsible for purchasing and selling the targets to maximize returns on the fund.
PE firms are often critiqued for being uncompromising in their pursuit of profit However, they typically possess a wealth of management expertise that allows them to boost the value of portfolio companies through operations and other support functions. They can, for instance guide a newly appointed executive team by guiding them through the best practices in financial and corporate strategy and assist in the implementation of streamlined IT, accounting and procurement systems to reduce costs. They can also increase revenue and identify operational efficiencies, which can help them improve the value of their assets.
Contrary to stock investments that can be converted quickly into cash Private equity funds typically require a huge sum of money and could take years look here before they are able to sell their target companies at a profit. As a result, the industry is extremely illiquid.
Working for a private equity firm usually requires previous experience in finance or banking. Associate entry-levels are primarily responsible for due diligence and financials, while junior and senior associates are responsible for the relationships between the clients of the firm and the firm. In recent years, the pay for these roles has increased.
