Private equity firms invest in businesses that aren’t publicly traded, and then work to expand or transform them. Private equity firms usually raise funds https://partechsf.com/cybersecurity-measures-to-protect-your-business/ in the form of an investment fund with an established structure and distribution funnel and then put that money into their targets companies. Investors in the fund are referred to as Limited Partners, and the private equity firm serves as the General Partner responsible for purchasing and selling the funds to maximize returns on the fund.
PE firms can be critiqued for being uncompromising and seeking profits at all price, but they have vast experience in management that allows them to increase value of portfolio companies by enhancing operations and supporting functions. For instance, they could guide new executives through the best practices in financial and corporate strategy and help implement more efficient accounting, procurement, and IT systems to reduce costs. They also can identify operational efficiencies and boost revenue, which is a method to increase the value of their holdings.
Unlike stock investments that are able to be converted quickly into cash, private equity funds usually require a lot of money and can take years before they are able sell a target company at profit. The industry is therefore highly illiquid.
Working at a private equity firm typically requires previous experience in banking or finance. Entry-level associates work primarily on due diligence and financing, whereas junior and senior associates focus on the relationship between the firm and its clients. Compensation for these roles has been on a rising trend in recent years.