Private Equity is an English expression that translates to "Private Asset", one investment fund modality that consists in the purchase of shares of companies that have good monetary income and that are in notable growth.
One of the great differentials of Private Equity Funds (PE), compared to Equity Funds, for example, is in the way it participates in a company. Companies that invest in other companies through PE funds actively participate in their management and administration, in addition to adding capital to the company.
The objective of companies investing through private equity it is to leverage and speed up the growth of promising companies, making them appear on the list of companies available on the Stock Exchange for the purchase and sale of shares. At this time, the company that invested in private equity, normally sells its share of the shares to other investors (stock investors) for much higher prices.
For this type of system to be possible, companies that specialize in investing in other companies, through
private equity, must establish a private contract between investors and managers. There is no chance, up to this point, for a company to be opened on the stock market.The first Private Equity Funds emerged in the United States during the 1980s. At first, this financing model was an option for small and medium companies
Private Equity and Venture Capital
The investments of venture capital("venture capital", in Portuguese translation) are characterized by financing small and promising companies (start-up companies), campaigns or new products on the market.
While the funds of private equity they also seek to finance potential companies, which already generate a large profit, but with the purpose of launching them on the stock exchange level.