Understanding Private Equity

Private equity refers to investments made in companies that are not listed on public stock exchanges. This category includes various strategies such as venture capital for startups, growth capital for mature companies, and leveraged buyouts (LBOs), which involve significant borrowing to acquire a company. Historically, the use of leveraged buyouts gained prominence in the 1970s, exemplified by major transactions like KKR's acquisition of Houde Industries, which set a precedent for such deals. The allure of private equity lies in the potential for higher returns compared to public equity, although the actual risk and return profile remains a topic of debate.