A private equity firm or private equity company (often described as a financial sponsor) is an investment management company that provides financial backing and makes investments in the private equity of a startup or of an existing operating company with the end goal to make a profit on its investments. The target companies are generally privately owned entities (not publicly listed),[1] but on rare occasions a private equity firm may purchase the majority of a publicly listed company and delist the firm after the purchase.
To complete its investments, a private equity firm will raise funds from large institutional investors, family offices and others pools of capital (e.g. also other private-equity funds) which supply the equity. The money raised, often pooled into a fund, will be invested in accordance with one or more specific investment strategies including leveraged buyout, venture capital, and growth capital. Although the industry has developed and matured substantially since it was invented, there has been criticism of private equity firms because they have pocketed huge and controversial profits while stalking ever larger acquisition targets.[2]
- ^ "What Private Equity Firms Are and How They Operate". Pro Publica. August 3, 2022.
- ^ "The Strategic Secret of Private Equity". Harvard Business Review. September 2007.