Private equity firms invest in companies that aren’t publicly traded and then work to expand or turn them around. Private equity firms usually raise funds in the form of an investment fund that has a defined structure and distribution funnel and then invest that money into the target companies. The investors in the fund are known as Limited Partners, and the private equity firm acts as the General Partner responsible for buying, managing, and selling the target companies to maximize the returns on the fund.
PE firms can be critiqued for being uncompromising and pursuing profits at all price, but they have extensive management experience that allows them to increase value of portfolio companies by improving the operations and other functions. They can, for instance guide a newly appointed executive team through the best practices in financial and corporate strategy and help implement streamlined accounting, IT and procurement systems that reduce costs. They can also boost revenue and identify operational efficiencies that can help them increase the value of their assets.
Unlike stock investments which can be quickly converted to cash however, private equity funds typically require a huge sum of https://partechsf.com/the-benefits-of-working-with-partech-international-ventures money and may take a long time before they are able to sell a target company for an income. This makes the industry highly liquid.
Working for a private equity firm usually requires prior experience in finance or banking. Associate positions at entry level focus on due diligence and financing, while junior and senior associates focus on the relationship between the firm and its clients. In recent years, the compensation for these positions has increased.
