private equity firm

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An investment firm that seeks to make high returns by (i) obtaining a controlling interest in a target company (if this is a public company it is then taken private); (ii) subjecting it to radical financial and organizational restructuring over several years with the aim of maximizing profits; and (iii) selling the revitalized company or floating it on the stock exchange. Most private equity investment is funded by debt; acquisitions generally take the form of a highly leveraged management buy-in (or management buy-out; see bimbo). Critics of the private equity industry, which saw spectacular growth in the early 2000s, have accused it of an asset-stripping mentality; there have also been concerns about unfair tax advantages (see shareholder debt; taper relief) and exemptions from disclosure.

Subjects: Financial Institutions and Services — Accounting.

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