Private equity: Understanding how private equity works

Private equity is a form of investment that enables institutional investors, private equity funds and other qualified investors to take equity stakes in unlisted companies. This type of investment is generally aimed at start-ups or companies seeking to accelerate their growth.

Private equity is generally characterized by long-term capital investments, contributions of strategic advice, relevant networks of contacts and management services. Private equity is based on hedge funds and is therefore not risk-free.

Private equity can take many forms, including venture capital, growth capital, expansion capital, private equity or recapitalizations. Private equity is often carried out by specialized funds (called private equity funds) that follow specific sectors or industries.

Once invested, private equity enables companies to accelerate their growth, finance development and/or expansion, and diversify their activities with the help of capital and strategic advice provided by the investor.

Private equity is often seen as a very attractive way for companies to gain value before a possible IPO.