Investment funds that acquire ownership stakes in private companies or buy out public companies to take them private. These firms typically improve operations, add value through strategic changes, then sell the companies for a profit after several years.
Term emerged in the 1970s to distinguish investments in private companies from public equity markets. The industry grew from early venture capital and leveraged buyout firms, formalizing around the concept of patient capital in non-public companies.
Private equity's secret weapon is time! Unlike public companies obsessed with quarterly earnings, PE firms can make long-term investments in technology, training, or market expansion that might hurt short-term profits but create substantial value over their typical 5-7 year holding period.
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