Private equity

Private equity (PE) is a term that refers to investment funds that purchase and reorganise businesses. These funds are usually structured as limited partnerships. Private equity, to put it more officially, is a kind of equity and one of the asset classes that consists of equity instruments and debt in operational businesses that are not listed on a public stock market.

It is most common for a private-equity firm, venture capital firm, or angel investor to make a private-equity investment in a startup company. All three types of investors have their own set of objectives, preferences, and investment methods, but they all give operating money to a target business in order to foster growth, new-product development, or restructuring of the company's operations, management, and ownership.

Leveraged buyouts, venture capital, growth capital, distressed investments, and mezzanine capital are some of the most common private equity investment methods in use today. An established or mature company is often acquired by an investment firm via a leveraged buyout deal, in which the private equity firm acquires majority control. This is in contrast to a venture-capital or growth-capital investment, in which the investors (typically venture-capital firms or angel investors) make investments in young, growing, or emerging companies, but in which the investors do not typically obtain majority control of the companies in which they invest.