Private equity firms invest in businesses that aren’t publicly traded and then work to grow or transform them. Private equity firms raise money in the form of an investment fund with a specific structure, distribution waterfall and then invest it into the companies they wish to invest in. The investors in the fund are known as Limited Partners, and the private equity firm is the General Partner, responsible for buying, managing, and selling the targets to maximize profits on the fund.
PE firms are sometimes accused of being ruthless in their pursuit of profits however, they usually possess a wealth of management expertise that allows them to increase the value of portfolio companies through operations and other support functions. They can, for example assist a new executive team by guiding them through the best practices in corporate strategy and financial planning https://partechsf.com/partech-international-ventures and assist in the implementation of more efficient IT, accounting, and procurement systems to reduce costs. They can also increase revenue and improve operational efficiency which will help them improve the value of their assets.
Private equity funds require millions of dollars to invest and it could take them years to sell a company at a profit. Because of this, the business is highly inliquid.
Working at a private equity firm typically requires previous experience in banking or finance. Associate entry-level associates are responsible for due diligence and finance, whereas senior and junior associates are accountable for the interaction between the clients of the firm and the firm. Compensation for these positions has been on an upward trend in recent years.
