Private equity firms often use leveraged buyouts to acquire new companies

Private equity deals sometimes come with layoffs.

Cheap debt and relatively minimal regulation have fueled private equity's expansion in recent years.

The first private equity fund was launched in 1960

At the time, the industry—and the public's understanding of it—was rather limited, and few private equity firms existed until the 1980s. The first leveraged buyout is thought to have taken place in 1955.

Private equity firms can be 'powerful partners' or 'formidable competitors'

Under the best circumstances, PE firms can increase a company's value using strategies that might not be suitable for public companies facing pressure for immediate shareholder returns. But PE firms are often portrayed negatively due to the aggressive strategies they sometimes use to cut inefficiencies. As PE has grown, many firms have changed their strategies, shifting away from aggressive scaling to more integrated acquisitions.

Private equity companies are selling off more acquisitions—but at much lower prices

In 2025, private equity exits were up by 5.4%, but the total value of those deals was down by 21.2% year-over-year. An exit occurs when a private equity firm either sells an acquired company or takes that company public.

Private equity is viewed as an alternative investment

These different types of private equity include venture capital, growth equity, and buyouts.

PetSmart and Hilton are among 10 of the most famous leveraged buyouts in history

Some of the most famous leveraged buyout deals include Blackstone's 2007 acquisition of Hilton Hotels, in which Blackstone took the then-public company private and then returned it to the public markets in 2013. A British PE firm bought PetSmart for $9B in 2014—one of the most expensive leveraged buyouts since 2007.

The majority of capital in private equity funds is provided by institutional investors

The individuals who invest this initial capital are called the firm's limited partners. Private equity firm LPs include sovereign wealth funds, university endowments, high-net-worth individuals, and more.

Explore the differences between private equity, venture capital, and hedge funds

Private equity firms focus on buying and improving private companies with the intent to sell them for profit or take them public. Venture capital is technically a form of private equity in which investors focus on startups and generally don't seek majority control of the company. Hedge funds are pooled investments for sophisticated investors that pursue a wide range of often complex strategies.

Should companies be owned by their workers?

In the last half-century, so-called private equity has transformed industries by purchasing private companies, cutting costs, loading up debt, and then selling the business at a premium—all at a huge profit to the investors. Workers, on the other hand, are often left with nothing. Listen to how both pro-worker economists and a private equity stalwart are trying to shift ownership to workers—a growing tactic proven to improve worker satisfaction and company value.

Private equity's expansion into healthcare has been criticized for raising patient medical costs

Between 2000 and 2018, PE's total investment in healthcare ballooned from $5B to $100B. While healthcare systems originally began consolidating as a solution to navigating complex regulations (and to make working with insurance companies easier), research suggests that private equity has both increased patient costs and decreased the quality of care in hospitals and doctors' offices.

Private credit and private equity are both alternative assets

Like private equity fund managers, private credit managers typically raise funds directly from investors, lending to corporations. The borrowers can benefit from the lack of middlemen and resulting efficiency, and the lenders often yield comparatively higher returns.

Between 2016 and 2023, PE spent more than $200B buying British companies

Between the COVID-19 pandemic and the United Kingdom's official departure from the European Union, the UK's economy struggled to recover. This economic strife led to British companies receiving steadily lower valuations than American companies, prompting a huge increase in PE investment. However, interest rates began increasing in 2022, putting pressure on the numerous leveraged buyout deals that took place between 2020 and 2021.

A private equity firm led the leveraged buyout of Toys 'R' Us before the company's bankruptcy

After being acquired by two private equity firms and a real estate company for more than $6B in 2005, Toys 'R' Us filed for bankruptcy in 2017. Many point to the $400M a year the company had to pay to service its debt, as well as increased competition from online retailers like Amazon, for draining its profits and ultimately dragging it under.

Private credit is a nonbank loan made directly to a business

Similar to private equity, private credit is part of the private markets world. Both strategies offer illiquid, privately negotiated investments for privately held companies. Unlike private equity investors, however, private credit investors typically do not take ownership stakes in the companies they invest in.

Leveraged ETFs made headlines in 2026 as a boom in single-stock leveraged products tied to AI companies drove volatility and record retail demand.

Investing in private equity is typically reserved for 'accredited investors'

Limiting PE to accredited investors helps protect less experienced investors from large and risky investments. Accredited investors must meet requirements set by the Securities and Exchange Commission—they're typically required to have a net worth exceeding $1M, for instance. (Some users may experience a paywall.)

Nearly half of billionaires planned to increase exposure to direct private equity investments in 2026.

See a database of large companies owned by private equity firms

The Private Equity Stakeholder Project tracked more than 200 companies owned by private equity with more than 7,000 employees. Companies on the list include J. Crew, Jersey Mike's Subs, Barnes and Noble, Panera Bread, and Tropical Smoothie Cafe.

Companies go public via an initial public offering (IPO) to raise large amounts of capital, helping them expand, invest in new ventures, hire more staff, or pay off debts.

See the anatomy of a venture capital firm

Venture capital firms get the money they use to invest in companies from limited partners, also called LPs. It’s the general partner’s job to manage that money and invest it in the right startups.

The funeral home industry is increasingly consolidating via private equity firms

A growing share of the funeral home industry is being acquired by private equity-backed firms. A 2022 article states that about 20% of this $23B business is owned by funeral home chains, and private equity-backed firms own about a quarter of those.

Special-purpose acquisition companies let companies skirt the IPO process

A video explains how private companies have taken advantage of this loophole, why investing in these companies isn’t always a good idea, and how blank-check companies (as they’re commonly called) work.

Many investment bankers work on IPOs

When a company undertakes an IPO, investment banks often buy many of the organization’s shares directly from the company, in order to sell the shares on the stock market. The bank stands to profit after marking up the shares.

An initial public offering is how a private company becomes public.

SPACs, explained

Special purpose acquisition companies make it easy for mature unicorns (companies valued at over $1B) to receive growth capital by going public. This process effectively skips the work of a traditional initial public offering, and its time-intensive investor negotiations. Typically, a well-known investor with expertise in a certain industry sponsors a SPAC with the intent to acquire a startup. Learn how it works and the risks involved here.

Some institutional investors are growing wary of private equity, as certain investments underperform traditional market indices

Private equity often attracts investors who can afford to tie up capital for long periods of time in exchange for higher returns than traditional investments. For many years, private equity at least tracked with the S&P 500 in terms of returns to investors, but in 2024 and 2025, it underperformed and posted declining returns.

Direct lending is the most common form of private credit

Other types include opportunistic credit, special-situations credit, mezzanine finance, venture debt, infrastructure debt, real estate debt, and more. All of these sources of capital technically create private transactions, so they can all call themselves private credit.

Private equity IRR is the internal rate of return on a PE investment or fund

It's typically expressed as an annualized percentage that incorporates both the size and timing of cash flows between investors and the fund. It's the discount rate that makes the net present value of all cash flows equal zero. Many private equity funds target a net IRR in the mid‑teens to low‑20s percent range, with an 8% "hurdle" or preferred return as a minimum before carried interest or "carry" is paid.

Direct lending typically involves 'senior loans'

Direct lending, the most common subtype of private credit, typically involves senior loans which are secured by a company's assets. "Junior capital," on the other hand, is a type of private credit that is not secured by a company's assets, making it generally riskier than direct lending.

In 2024, US private equity posted an 8.1% return

Tracked by Cambridge Associates, 2024 performance saw limited partner distributions overtake contributions for the first time in years. Cambridge Associates, a leader in the space, typically uses a 2.0x+ MOIC (Multiple on Invested Capital) as a benchmark for top-quartile PE fund success.

Stock buybacks are when a company purchases some of its own shares of stock

This reduces the number of shares on the market and, therefore, makes the remaining shares more valuable. Buybacks have received a lot of criticism in recent years for many reasons, such as how they could artificially inflate share prices.

The 'Two and Twenty' structure allows hedge funds and private equity firms to earn significant returns

With this structure, firms charge limited partners or "LPs" a 2% management fee for overseeing the fund (assets under management or AUM) and take 20% of the fund's overall profits (carried interest). Many private credit funds also operate under this structure.

Former US Senator Mitt Romney cofounded a revolutionary private equity firm

Mitt Romney cofounded Bain Capital—a private investment group that manages more than $215B—in the 1980s before becoming a politician. Bain Capital is credited with revolutionizing private equity by focusing on consolidating and streamlining business operations rather than relying on financial engineering to increase company profits.

Explore an alternative investments timeline

From what’s known as the first leveraged buyout, when JPMorgan acquired the Carnegie Steel Company, to the creation of the first-ever hedge fund, alternative investments have a long history.

Initial public offering (IPO) is the term for when a company goes public

When a company completes its IPO, it's no longer a privately owned organization. Anyone can invest in the company by buying its shares on the stock market—opening up ownership of the business to the general public.

Roughly 10% of US apartments were owned by private equity firms as of 2025.

Visualize the world's top 50 private equity firms in 2025 by capital raised.

Ride along on one coffee company's journey through the stock market to better understand how a company goes from private to public.

Private companies are often harder to value than public companies

That's partly because there isn't readily available stock information, and financial accounting is kept behind closed doors. Typically, determining the value of a private company involves, among other things, closely comparing the private company with its competitors.

BNPL companies typically make money via merchant fees rather than interest

When a merchant partners with a buy now, pay later app, consumers are more likely to spend more money with that merchant—meaning that the merchant is willing to pay a small fee in exchange for the ability for customers to pay with buy now, pay later.

Many investment bankers work on mergers and acquisitions

At some point in their careers, many investment bankers work on facilitating or advising clients on mergers or acquisitions. From analyzing industry group trends to deal negotiations, an M&A in investment banking explainer outlines how investment bankers handle these business transactions.

Activist investors use large ownership positions to influence companies

By holding large ownership positions, which often come with leveraged access to a company's board or the ability to force a shareholder vote, activist shareholders can change a company's corporate governance, leadership, and overall direction. Critics argue that activist shareholders hurt companies in the long term by prioritizing short-term higher shareholder returns over sustainability and growth efforts.

What is buy now, pay later?

The buy now, pay later industry allows consumers to buy something immediately and pay in installments, typically without the need for applications or credit scores associated with credit cards. BNPL has boomed in the last decade, led by fintech companies Affirm, Klarna, and Afterpay, which have targeted young adults. Some critics say BNPL is a reinvented version of payday loans that allow borrowers easy access to cash with relatively few barriers.

Venture capital is a type of financing that firms and funds use to invest in startups they believe have the potential for long-term growth

Household name companies such as Airbnb and Uber might not exist without venture capital, which is commonly referred to as "VC" for short.

Family offices have been increasing their allocations to private credit

Private firms that manage family fortunes have been investing more in alternatives like venture capital and real estate, impacting the wider financial world.

The private credit industry offers nonbank loans directly to businesses, particularly privately held midmarket companies.

Some private credit funds trade on the stock market

These funds, which trade at market prices, are called "public BDCs," which stands for "business development companies." For instance, the global alternative investment manager Ares Management Corp. has a public BDC.

How ‘vulture’ hedge funds make money

Some hedge funds specialize in snapping up distressed assets, like failing newspaper chains, and further stripping down their operational expenses in a bid to make a profit from the initial capital outlay. Delve into how one secretive firm known for the practice operates—and what’s at stake for the broader economy.

Angel investors often receive significant equity because of the risk they take

Angel investors fund startups at an early stage, at which time a company’s success is less assured. In exchange, they often ask for a significant equity stake.