A private equity firm takes a stake in a business that is not publicly listed and is able to turn the business around or expand it. Private equity firms typically raise funds through an investment fund that has a clearly defined structure and distribution system and invest the funds into their target companies. Limited Partners are the investors in the fund. Meanwhile, the private equity firm is the General Partner, responsible for purchasing selling, buying, and managing the targets.

PE firms are often criticized for being ruthless and seeking profits at all cost, but they possess extensive management this link experience that allows them to improve the value of portfolio companies by improving the operations and supporting functions. For instance, they could walk a new executive staff through the best practices for financial and corporate strategy and assist in the implementation of streamlined accounting procurement, IT, and systems to reduce costs. They also can find ways to improve efficiency and increase revenue, which is one method to enhance the value of their assets.

Unlike stock investments which can be quickly converted to cash and cash, private equity funds generally require millions of dollars and may take years before they are able to sell a company they want to purchase at an income. This is why the industry is highly illiquid.

Private equity firms require prior experience in banking or finance. Associate associates at entry-level work mostly on due diligence and financing, whereas junior and senior associates concentrate on the relationship between the firm and its clients. In recent years, the compensation for these positions has risen.