Private equity firms fill variety of roles

So what exactly are these private equity firms you’ve heard about in the financial media? Well, they generally make their money by offering companies guidance to make them more efficient and funding to rescue them or help them grow.


There are several kinds of private equity organizations. One is the venture capitol group, which tends to make somewhat risky investments in young, growing firms before they go public and trade stock. Then there are the leveraged buyout outfits, which like to buy huge public companies by taking on a lot of debt. The LBO firm will take the company private and use much of its excess cash to pay off its debt, often while trying to improve the efficiency of the company. Eventually the acquired company will be sold to another buyer or to the public, via initial public offerings.


Other private equity investments include buying chunks of private companies and buying distressed companies, with the intent of restructuring and then selling them. There are private equity funds too which aggregate and invest the money of smaller investors. Money invested in private equity is often tied up for at least several years. Private equity organizations aren’t required to make public the kind of information that public companies must disclose.


Some of the biggest names in private equity are Kohlberg, Kravis, Roberts with assets estimated at more than $86 billion. The Carlyle Group, with more than $75 billion, and the Blackstone Group, with more than $98 billion.