A private equity firm takes a stake in a business which is not listed on the stock exchange and attempts to turn the company around or grow it. Private equity firms usually raise funds in the form of an investment fund with a clearly defined structure and distribution waterfall and then put that money into their target companies. Limited Partners are the investors in the fund, whereas the private equity firm is the General Partner accountable for buying selling, managing, and buying the targets.

PE firms can be criticised for being brutal and pursuing profits at all price, but they have extensive management experience that allows them to enhance the value of portfolio companies by enhancing the operations and other functions. For example, they can guide new executives through the best practices for financial and corporate strategy and assist in implementing streamlined accounting procurement, IT, and processes to cut costs. They can also boost revenues and discover operational efficiencies that can help them increase the value of their assets.

Unlike stock investments that can be converted in a matter of minutes to cash Private equity funds typically require a huge sum of money and may take years before they are able sell a target company for profit. As a result, the market is extremely inliquid.

Private equity firms require previous experience in banking or finance. Associate entry-level associates are principally responsible for due diligence and finance, whereas senior and junior associates are accountable for the interaction between the clients of the firm and the company. In recent years, the compensation for these positions has risen.

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