What Private Equity Firms Are and How They Operate
Article

What Private Equity Firms Are and How They Operate

Chris Morran and Daniel Petty
ProPublica, 2022
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7

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The private equity model is unique in capital markets: Investors directly acquire a business; reorganize its operations, financials and management; and then exit the company through a sale for more than the original purchase price. While this framework profitably serves private equity investors, troubling aspects lurk behind the scenes. Investigative journalists Chris Morran and Daniel Petty delve into the sector to explore how – and if – private equity creates value for companies and their stakeholders. Executives, students and investors will find this an informative report.

Summary

Private equity has increased its market position as an asset manager and acquirer of businesses.

With $6.5 trillion under management in the United States alone in 2020, private equity (PE) continues to account for an increasing share of financial assets. PE funds are unique investment vehicles that deploy capital directly into businesses through acquisitions. PE managers receive capital from institutional and accredited investors, and then put that money to work by purchasing companies directly, streamlining their operations and subsequently selling them for a higher price.

PE operates across diverse industries; for example, the number of health care...

About the Authors

Chris Morran is an audience editor at ProPublica, where Daniel Petty is the director of audience strategy.

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