Investopedia explains ‘Private Equity’
The size of the private equity market has grown steadily since the 1970s. Private equity firms will sometimes pool funds together to take very large public companies private. Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO.
Hoover’s overview of the “Investment Firms industry”
Excerpt from Investment Firms Report
Companies in this industry take equity positions in target companies, typically owning a controlling interest. Major companies include Berkshire Hathaway, Carlyle Group, KKR, and Icahn Enterprises (all based in the US), along with Sullivan Street (UK) and the investment arms of banks such as Deutsche Bank (Germany), Société Générale (France), and Mitsubishi UFJ (Japan).
Demand is driven by the movement of capital throughout the economy. Profitability depends on the ability to identify targets for investment. Large firms have advantages in access to capital. Small firms can compete by specializing in market segments.
Products, Operations & Technology
The main revenue sources for investment firms are dividends (about 50 percent) and interest (about 20 percent). Investment firms assemble the capital to acquire and control target firms, often in partnership with large investors such as pension funds, university endowments, or charitable organizations.