Private equity
Private equity investors provide capital to businesses with the aim of increasing the value of their stake and ultimately realising a return. They may invest in growth, acquire a business or take a listed company private, often alongside debt financing. Investors assess governance, cash generation, risk, valuation and a feasible exit such as a sale or public listing. The financing and control terms vary by deal; private equity is not simply the same thing as all venture capital or a guarantee of an eventual profitable exit.
Worked example
A fund buys a controlling stake in an unlisted manufacturer, supports an operational improvement plan and later sells its stake to another investor. Its return depends on the purchase and sale prices, distributions, financing and costs.
Common mistake
Assuming every private equity investment is an early-stage venture capital investment or that the investor can exit at a predetermined profit.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |