A private equity company takes a stake in a business that is not publicly listed and seeks to turn the company around or expand it. Private equity firms typically raise funds through an investment fund with a defined structure and distribution system and invest that money into the companies they want to invest in. Limited Partners are the investors in the fund, whereas the private equity firm is the General Partner, responsible for buying or selling the fund and overseeing the targets.

PE firms are often criticized for being ruthless and pursuing profits at any price, but they have years of management experience that allows them to enhance the value of portfolio companies by improving the operations and supporting functions. They can, for example, guide a new executive team by providing the best practices for financial strategy and corporate strategy and assist in the implementation of more efficient IT, accounting and procurement systems to reduce costs. They can also boost revenue and identify operational efficiencies that can help them increase the value of their assets.

In contrast to stock investments, which are able to be converted quickly into cash however, private equity funds typically require a huge sum of money and can take years before they are able sell a company they want to purchase at profit. As a result, the industry is highly illiquid.

Working at a private equity firm typically requires previous experience in finance or banking. Associate positions at entry level focus on due diligence and financing, while junior and senior associates are focused on the relationship between the firm and its clients. In recent years, compensation for these roles has risen.

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