A private equity company is an investment company that collects funds from investors to purchase stakes in companies and assist them to grow. This is different than individual investors who buy stock in publicly traded companies, which gives them dividends, but doesn’t grant them direct influence over the company’s operations and decisions. 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 grow. Private equity firms can use debt to buy and then take over a business this is referred to as leveraged purchases. They then sell the business at a profit, and receive management fees from businesses in their portfolio.

This cycle of buying, selling and re-building can be a long process for smaller businesses. Many https://partechsf.com/partech-international-data-room-do-it-yourself/ are seeking alternative funding methods that let them access working capital without the added burden of the PE company’s management fees.

Private equity firms have pushed back against stereotypes that paint them as thieves of corporate assets, stressing their management expertise and examples of successful transformations of their portfolio businesses. However, critics, such as U.S. Senator Elizabeth Warren argues that private equity’s main focus is on quick profits that destroy long-term goals and damages workers.