private equity firm
A company that raises money in private markets (i.e., from institutional
investors such as pension funds or from wealthy individuals), rather
than from public markets (such as major stock exchanges) and then
uses these monies to make various types of investments. The most
well-known private equity firms, such as Kolberg Kravis and Roberts
and Blackstone, operate by buying all of the shares of a company
listed on a public stock exchange (such as the New York Stock Exchange
(NYSE)). Since it now owns the corporation, the private equity firm
then brings in a new management team, in an attempt to make the
newly purchased company more profitable and thus more valuable.
Ultimately, the private equity group resells the company later,
hopefully for a higher price per share than the one for which it
was originally acquired on the public market.