What it is
Private equity firms raise capital from institutional investors and wealthy individuals to acquire ownership stakes in companies. Unlike public market investments, these are illiquid, long-term holdings. PE firms typically take a controlling interest, often using significant debt to finance acquisitions (leveraged buyouts), and work to improve the company's efficiency, management, or market position before selling it for a profit, usually within 3-7 years.
Private equity activity often makes news through large-scale leveraged buyouts, particularly of public companies, or when portfolio companies are prepared for an initial public offering (IPO) or sold to another firm. These transactions can impact public markets by delisting companies or creating new public offerings. Retail investors might indirectly benefit if their pension funds or 401(k)s invest in PE funds, or directly if a PE-backed company goes public.
Why it matters
PE activity can signal valuations in private markets and often leads to IPOs or large M&A deals that impact public companies.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice