private equity

Private capital refers to entities that provide financing to companies without issuing securities in the public markets. The two categories of private capital we will review here are private equity and private debt.

Private Equity

The majority of private equity funds invest either in private companies or public companies they intend to take private (leveraged buyout funds) or in early stage companies (venture capital funds). The companies in which a private equity fund invests are known as its portfolio companies. Two additional, but smaller, categories of private equity funds are distressed investment funds and developmental capital funds.

A private equity fund may also charge fees for arranging buyouts, for a deal that does not happen, or for handling asset divestitures after a buyout.