A private equity company is an investment company that seeks funds from investors to purchase stakes in businesses and help them expand. This is different than individual investors who invest in publicly traded companies that pay dividends, but doesn’t give them direct influence over the company’s decisions and operations. Private equity firms invest in a collection of companies, referred to as a portfolio. They typically seek to take over the management of these businesses.

They https://partechsf.com/partech-international-ventures-is-an-emerging-and-potentially-lucrative-enterprise-offering-information-technology-services often purchase an organization that has room for improvement, and make changes to increase efficiency, lower expenses, and expand the company. Private equity firms can make use of debt to buy and then take over a business in a process referred to as a leveraged purchase. They then sell the company at a profit, and pay management fees to companies that are part of their portfolio.

This cycle of selling, buying, and upgrading can be very time-consuming for smaller companies. Many are looking for alternative financing methods that permit them to access working capital without the burden of a PE firm’s management costs.

Private equity firms have pushed back against stereotypes that paint them as corporate strippers assets, and have emphasized their management skills and demonstrating examples of transformations that have been successful for their portfolio companies. But critics, like U.S. Senator Elizabeth Warren argues that private equity’s goal is to make quick profits that destroy long-term values and harms workers.