What Is a Private Equity Firm?
A private equity International Ventures company is an investment company which raises money to help companies grow by purchasing stakes. This differs from individual investors who invest in publicly traded companies, which allows them to receive dividends, but has no direct effect on the company’s decision-making process and operations. Private equity firms invest in a group of companies, called a portfolio, and typically look to take over management of these businesses.
They will often find a company with room for improvement and buy it, implementing changes to improve efficiency, cut costs and help the company grow. Private equity firms could borrow money to purchase and then take over a business, a process known as leveraged buying. They then sell the company at a profit, and collect management fees from companies in their portfolio.
This cycle of buying, selling and re-building can be a long process for smaller companies. Many are seeking alternative funding methods that allow them to access working capital without the added burden of the PE firm’s management fee.
Private equity firms have been able to fight against stereotypes that paint them as corporate strippers assets, by highlighting their management expertise and examples of transformations that have been successful for their portfolio businesses. Critics, such as U.S. Senator Elizabeth Warren, argue that private equity’s focus on making quick profits erodes the value of the company and is detrimental to workers.
