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Private Equity Firm

Private Equity Firm

Definition

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.

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