What is a Private Equity Firm?
A Brief Explanation of a Private Equity Firm| Definition
A private equity firm is a company that manages investments in operating or target companies. Some of the strategies used include leveraged buyouts, venture capital, and growth capital. Normally, a private equity firm, referred to as a general partner, will raise a fund from investors or limited partners. The private equity firm will use the pool of capital raised for transactions of varying size and sector. Firms receive a management fee (percentage of assets) as well as a percentage of the gains earned. Private equity firms can receive a return on their investment through initial public offerings, mergers or acquisitions, and recapitalizations. A private equity firm will typically invest for longer periods of times, sometimes over the span of many years. Firms also take a pivotal role in the management and day to day operations of the companies acquired. Famous private equity firms include Blackstone Partners, Carlyle Group, and KKR.
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