A private equity company is an investment firm that raises money from investors to buy stakes in companies and assist them grow. This is different from individual investors who buy stock in publicly traded companies which pay dividends, but doesn’t give them a direct say in the company’s decisions or operations. Private equity firms invest in a group of companies called portfolios and attempt to take control of these businesses.
They usually identify a company that could be improved and buy it, making changes to improve efficiency, reduce costs and help the business expand. Private equity firms may borrow money to purchase and take over businesses in a process referred to as a leveraged purchase. They then sell the company for a profit and collect management fees from the companies within their portfolio.
This recurring cycle of acquiring, upgrading and selling can become time-consuming and costly for companies particularly small ones. Many are looking keep your deals moving via the best data room service for alternative funding methods that let them access working capital without the added burden of a PE firm’s management costs.
Private equity firms have fought against stereotypes portraying them as strippers, highlighting their management expertise and successful transformations of portfolio companies. But some critics, including U.S. Senator Elizabeth Warren, argue that private equity’s obsession with making rapid profits damages the long-term value and is detrimental to workers.
