A private equity company is an investment firm which raises money to help companies grow by buying stakes. This is different from individual investors who buy stock in publicly traded firms which pay dividends, but doesn’t give them any direct control over the company’s operations and decisions. Private equity firms invest in a group of companies called portfolios and seek to take control of these businesses.
They will often buy an enterprise that has room for improvement. They then make changes to increase efficiency, reduce expenses, and expand the company. In some instances private equity firms make use of loans to purchase and take click reference over a business, known as leveraged buyout. They then sell the company at a profit and collect management fees from the businesses in their portfolio.
This cycle of selling, buying, and then reworking can be lengthy for smaller companies. Many companies are seeking alternatives to funding options that will allow them access to working capital without having the management costs of the PE firm.
Private equity firms have fought back against stereotypes of them being strippers, by highlighting their management expertise and the success of transformations of portfolio companies. But critics, like U.S. Senator Elizabeth Warren, argue that private equity’s focus on making quick profits erodes the value of the company and harms workers.