Private Equity

Private equity raises money from a small group of investors and buys companies outright. Where venture capital funds early-stage firms, private equity acquires established businesses.

After acquiring, it reshapes them: cutting costs, restructuring operations, replacing management. Having lifted the value, it sells the company or lists it after roughly three to seven years.

Debt does much of the work. The fund contributes part of the price and borrows the rest against the acquired company's own assets — a leveraged buyout, which magnifies returns when it works and buries the company in debt when it does not.

Opinion divides at exactly that point. Supporters credit it with reviving failing businesses; critics say it loads companies with debt and cuts staff for short-term gain.

It is generally closed to individual investors: minimums are high and capital is tied up for years. Listed managers and small-ticket access products have appeared recently, but their structures are complex and warrant care.