Private equity firms are an investment company that raises money from investors to buy stakes in companies and help them grow. This is different than individual investors who buy stock in publicly traded companies which pay dividends, but doesn’t grant them direct control over the company’s decisions and operations. Private equity companies invest in groups of companies, referred to as portfolios, and try to take over the management of these businesses.

They typically identify a company that could be improved and buy it, making adjustments to increase efficiency, reduce expenses and help the business expand. In some instances private equity firms utilize the use of debt to purchase and take over a company which is referred to as a leveraged buyout. They then sell the business at a profit, and take management fees from the companies that are part of their portfolio.

This cycle of purchasing, enhancing and selling can be a time-consuming and costly for businesses particularly smaller ones. Many https://partechsf.com/partech-international-data-room-do-it-yourself/ companies are looking for alternatives to funding options that will allow them access to working capital without the management costs of a PE company added.

Private equity firms have fought against stereotypes portraying them as thieves of corporate assets, and have emphasized their management expertise and examples of successful transformations of their portfolio companies. Critics, such as U.S. Senator Elizabeth Warren argues that private equity’s focus is on quick profits, which destroys long-term goals and damages workers.