Private Equity

Brief Definition

Private equity refers to investment funds that buy, manage, and restructure companies that are not publicly traded on the stock market. Private equity firms aim to improve the performance of these companies and increase their value over time. Eventually, they sell the companies for a profit through various exit strategies, such as selling to another company, taking the company public through an initial public offering (IPO), or other means.

Further Explanation

Private equity refers to investment funds that buy, manage, and restructure companies that are not publicly traded on the stock market. These investments are typically made by institutional investors and high-net-worth individuals who provide substantial amounts of capital. Private equity firms aim to improve the performance of these companies and increase their value over time. Eventually, they sell the companies for a profit through various exit strategies, such as selling to another company, taking the company public through an initial public offering (IPO), or other means.

Example:
A private equity firm might invest in a promising new technology company. The firm provides funding and expertise to help the company grow. After a few years, as the company grows and becomes profitable, the private equity firm may choose to sell its shares to another company or exit through an initial public offering (IPO), thereby earning a return on the investment.