private equity (PE)

Private equity (PE) is an investment class consisting of capital that is not listed on a public exchange, typically used to purchase or take control of mature, established companies. Unlike venture capital, which bets on unproven startups, private equity firms usually acquire majority stakes or 100% of a business that is already generating significant revenue but may be underperforming or in need of restructuring. The PE firm uses its expertise to streamline operations, cut costs, or pivot the business model with the goal of selling the company (an "exit") at a much higher valuation, often within four to seven years. These deals are frequently structured as leveraged buyouts (LBOs), where the firm uses a combination of its own capital and a significant amount of borrowed money to fund the acquisition.