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What Private Equity Firms Are and How They Operate
Article

What Private Equity Firms Are and How They Operate

Chris Morran and Daniel Petty
ProPublica, 2022
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Editorial Rating

7

Qualities

  • Overview
  • Background
  • Concrete Examples

Recommendation

The private equity model is unique in capital markets: Investors directly acquire a business; reorganize its operations, financials and management; and then exit the company through a sale for more than the original purchase price. While this framework profitably serves private equity investors, troubling aspects lurk behind the scenes. Investigative journalists Chris Morran and Daniel Petty delve into the sector to explore how – and if – private equity creates value for companies and their stakeholders. Executives, students and investors will find this an informative report.

Take-Aways

  • Private equity has increased its market position as an asset manager and acquirer of businesses.
  • Some view private equity as a successful form of capitalism, while others note that it leads to long-term wealth destruction and stakeholder dissatisfaction.
  • The top financial driver for private equity is its use of debt to finance acquisitions.

About the Authors

Chris Morran is an audience editor at ProPublica, where Daniel Petty is the director of audience strategy.

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