Private equity firms invest in companies that are not listed publicly and then attempt to expand or transform them. Private equity firms usually raise funds in the form of an investment fund with a clearly defined structure and distribution plan, and then they invest that money into the target companies. Limited Partners are the investors in the fund, whereas the private equity firm is the General Partner responsible for buying selling, managing, and buying the funds.

PE firms can be accused of being ruthless and pursuing profits at any cost, but they possess years of management experience that allows them to enhance the value of portfolio companies through improving operations and other functions. They could, for example guide a newly appointed executive team by providing the best practices for corporate strategy and financial planning and assist in the implementation of streamlined IT, accounting and procurement systems to cut costs. They also can find operational efficiencies and boost revenue, which is one method to improve the value of their possessions.

Unlike stock investments which can be converted in a matter visit site of minutes to cash however, private equity funds typically require a huge sum of money and could take years before they are able sell a company they want to purchase at a profit. Because of this, the industry is extremely illiquid.

Private equity firms require experience in finance or banking. Entry-level associates work primarily on due diligence and financing, whereas senior and junior associates focus on the relationship between the firm and its clients. Compensation for these positions has been on an upward trend in recent years.