Private equity firms invest in companies that are not publicly listed and work to grow or turn them around. Private equity firms raise funds in the form an investment fund that has a predetermined structure, distribution waterfall and then invest it in their chosen companies. The fund’s investors important source are referred to as Limited Partners, and the private equity firm is the General Partner responsible for purchasing, managing, and selling the targets to maximize returns on the fund.

PE firms can be criticised for being brutal and pursuing profits at all cost, but they have years of management experience that allows them to enhance the value of portfolio companies through improving operations and supporting functions. For instance, they are able to guide new executive staff through the best practices of financial and corporate strategy and assist in the implementation of streamlined accounting procurement, IT, and systems to drive down costs. They can also identify operational efficiencies and boost revenue, which is one method to improve the value of their holdings.

In contrast to stock investments, which can be converted in a matter of minutes to cash Private equity funds typically require a large sum of money and can take years before they can sell a company they want to purchase at profit. This is why the industry is extremely illiquid.

Working for a private equity company typically requires prior experience in banking or finance. Associate entry-level associates are responsible for due diligence and finance, while senior and junior associates are accountable for the interaction between the clients of the firm and the company. In recent times, compensation for these roles has risen.