Private equity

Private equity refers to investment firms that raise money from institutions and wealthy individuals to buy entire companies, usually not publicly traded, with the goal of improving the business and selling it for a profit years later. Buyouts are often financed heavily with debt through a leveraged buyout.

Unlike a public market investor, a private equity firm typically takes an active, hands-on role in running the companies it owns, often replacing management, cutting costs, or pursuing acquisitions before eventually exiting through a sale or an IPO.