Investment funds that buy and restructure private companies are known as private equity. The funds raise capital from institutional investors and wealthy individuals, acquire controlling stakes in companies that are not publicly traded, improve operations or capital structure, and later sell the companies at a profit—through a sale to another firm, a management buyout, or an initial public offering.

Private-equity firms typically hold investments for several years and take an active role in governance. Leverage is often used to amplify returns. Success depends on selecting the right targets, executing operational improvements, and exiting at favorable valuations. The industry has grown into a major force in corporate ownership and restructuring.

Critics point to job losses, heavy debt loads, and short-term pressure on portfolio companies. Supporters emphasize the discipline and capital that private equity can bring to underperforming or capital-constrained businesses. For investors, private equity offers the potential for higher returns in exchange for lower liquidity and higher risk.