Private Equity

In its broadest sense, private equity is an investment derived from a nonpublic entity, or private company. These investments differ from those in publicly traded companies that allow investors to purchase shares of stock. Private equity (PE) is much bigger; these investors don’t just invest in stock—they buy entire companies.

In modern private equity, a pool of capital is created from private investors, ranging from university endowments and pension funds to hedge funds, Wall Street investment banks, and high-net-worth individuals. The managers of these private equity pools, or funds, then put that capital to work, generally by purchasing private or public companies, “fixing” them so they generate more revenue, cash, and earnings, and then “flipping” them by selling the improved company to another buyer or taking it public on the equity markets.

Private-equity firms invested $644 billion in U.S.-based companies in 2016, according to the American Investment Council. That year, the top 10 states in terms of investment were Texas, California, Massachusetts, Florida, New York, Pennsylvania, Illinois, Georgia, Ohio, and Colorado. 

Private equity investments aren’t just about buying and selling companies, however. Many private equity firms invest in debt, helping a company salvage itself by loaning it money in exchange for an equity position or another form of return. Some private equity firms target funds at startup companies—these are called venture capital firms, though a diversified private equity management company will often include venture capital activity alongside acquisitions and debt purchases. Venture capital investments are often made in exchange for equity in the private company that the firm hopes will turn into big profits should the startup go public or get sold.

The majority of private equity firms are headquartered in the United States, but opportunities are found throughout the world (especially in Europe). Approximately 4,590 private equity firms have headquarters in the United States. Eight of the top 10 firms in terms of fundraising totals are located in the U.S., according to Private Equity International, a global news service that focuses on the PE industry.

Since the early 2000s, private equity funds have grown tremendously. In June 2017, private equity firms worldwide managed $2.83 trillion in assets, according to The 2018 Preqin Global Private Equity & Venture Capital Report, up from “only” $716 billion in managed assets in December 2000.

Naturally, when dealing with billions of dollars and major corporations, private equity firms need a wide variety of talented employees. And that’s where you’ll come in. Private equity firms employ some of the most experienced talent in corporate America, and their personnel needs are as broad as they are deep. Whether you’re fresh out of undergrad or a seasoned corporate veteran, chances are you can find a home with private equity firms. And in doing so, you’ll have a hand in making billions for your investors while guiding large corporations, and the thousands of people they employ, through major changes and improvements. General partners (which are often the owners of the firm), researchers, and analysts are the major players in this industry, but firms also need sales, legal, compliance, marketing, investor relations, and office support workers. Those with bachelor’s degrees can qualify for administrative support and other entry-level jobs at private equity firms, but top-level PE careers require an MBA. The industry is also seeking workers with degrees in law and accounting, as well as in engineering and science-related fields. 

Next Section: Primary Products