What is "Private Equity"

[WendyS]

I keep reading in the press about proposed Treasury clampdowns on "Private Equity". Can somebody please explain exactly what this is? Unit Trusts, Investment Trusts, the shareholdings of individual private investors, or what?

[buildersmate]

None of the above. Its where wealthy individuals get together to put some of their resources into a pool, then that pool buys out a company, or 2 or more. I guess Governments get concerned if the resources are used to try and asset strip perfectly good companies whose sum of the parts are worth more than the whole (in terms of market capitalisation), and get broken up with loss of jobs.

[WendyS]

Thanks. Now I understand what all the fuss is about.

[Andy008]

Private equity firms take public business private, strip the assets as much a possible and then sell them on to another buyer or re-float them on the exchange.

If you have ever seen Wall Street, and Michael Douglas's character Gordon Gecko, that is essentially asset stripping.

From a employee's point of view private equity-owned businesses are usually the worst to work for, particulary retailers like Debenhams as it means minimum wages and virtually no perks.