Private equity firms invest in companies that are not publicly listed and then work to expand or turn them around. Private equity firms usually raise funds in the form of an investment fund with an established structure and distribution funnel and then invest the funds into the companies they want to invest in. Fund investors are referred to as Limited Partners, and the private equity firm is the General Partner in charge of buying, managing, and selling the target companies to maximize the returns on the fund.
PE firms can be criticized for being ruthless and pursuing profits at any cost, but they have extensive management experience that allows them to increase value of portfolio companies through improving operations and other functions. For instance, they can walk a new executive staff through the best practices of financial and corporate strategy and help implement more efficient accounting procurement, IT, and processes to cut costs. They can also find ways to improve efficiency and increase revenue, which is just one method to improve the value of see post their holdings.
Private equity funds require millions of dollars to invest and it could take them years to sell a company at a profit. The industry is therefore highly in liquid.
Working at a private equity company typically requires previous experience in banking or finance. Associate entry-levels focus on due diligence and financing, whereas junior and senior associates focus on the relationship between the firm and its clients. In recent years, the compensation for these positions has risen.
