Private equity is a form of investment where funds are directly invested into private companies, or where private equity firms acquire public companies to take them private.
For example, a private equity firm acquires a $20 million revenue trucking company for $6 million in equity and $14 million in debt. Over 5 years, the firm improves operations, expands the fleet, and sells the business for $32 million — generating a strong return for its investors.
Why it matters: They bring massive capital and operational expertise to scale businesses rapidly, but expect aggressive returns and often a controlling stake.
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