Private equity

Type of financing / From Wikipedia, the free encyclopedia

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In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships, which invest in and restructure private companies. A private-equity fund is both a type of ownership of assets (financial equity) and is a class of assets (debt securities and equity securities), which function as modes of financial management for operating private companies that are not publicly traded in a stock exchange.[1]

Private-equity capital is invested into a target company either by an investment management company (private equity firm), a venture capital fund, or an angel investor; each category of investor has specific financial goals, management preferences, and investment strategies for profiting from their investments. Each category of investor provides working capital to the target company to finance the expansion of the company with the development of new products and services, the restructuring of operations, management, and formal control and ownership of the company.[2]

As a financial product, the private-equity fund is a type of private capital for financing a long-term investment strategy in an illiquid business enterprise.[3] Since the 1980s, the financial press describe "private equity fund" investment as the superficial rebranding of investment management companies who specialized in the leveraged buyout of financially weak companies.[4]