Private Equity - Concept

Private equity refers to shares in companies that are not listed on a public stock exchange. It is a situation where in there is no traditional market place, such as a stock exchange to sell or buy investments. Hence a private equity firm has to find a buyer in absence of a market place, where the transfer of private equity is strictly regulated.

Private equity firms raise funds for investment in unquoted companies, to help them grow and succeed. If one is looking to start up, expand, buy into a business, buy out a division of the parent company, turnaround or revitalize a company, private equity can help in doing so.

Private equity is invested in exchange for a stake in a company and as shareholders; the investors' returns depend on the growth and profitability of the business. Post-2000, a few additional categories have been introduced to the PE market. These include companies involved in various aspects of real estate financing, investment companies and special purpose vehicles [SPVs], established for offering financially engineered products to investors, and equity interests in secondary PE funds.