Glossary
Definition
Private Equity
Investment in companies not listed on a public stock exchange.
Private equity (PE) refers to investments in companies that are not publicly traded. PE firms typically acquire majority stakes in established businesses, apply operational improvements, and sell the companies (via IPO or strategic sale) at a profit. Leveraged buyouts (LBOs) are the most common PE transaction type.
Frequently Asked Questions
How do private equity firms make money?
PE firms earn a management fee (typically 2% of assets) and a carried interest (20% of profits above a hurdle rate) when they exit investments.