Private equity is a term that applies to firms that make direct investments in companies. As a general rule these companies are organized as limited partnership funds. They raise money from individual investors and then for a yearly fee and a slice of the profits they make investments in other companies. Usually, they buy the entire company from either public shareholders or the current owners. You may be familiar with the term LBO or Leveraged Buyout. This term usually applies to a private equity partnership that buys a company. They invest their funds to buy the company and often use debt to fund part of the transaction. If you want to invest in a private equity company you need to have a substantial amount of money -- usually at least $1 million -- and you must meet certain other criteria.
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