Functions of Private Equity (PE) Firms

As the term PE suggests it is a source of investment capital from sharp individuals and institution for the sole purpose of making profit by obtaining equity ownership in companies. Typically this investment is locked for a period of four to seven years. Having said so it is important to know what are the critical functions within a private equity firm:

Deal Origination

As the name suggests it is about striking a deal by managing a maintaining relationships with mergers and acquisitions, Investment banks, intermediaries and other such transaction authorities to ensure that these deals are hassle free and in continuation. There are some firms who often employ such staff who can identify prospective acquisitionist and then approach company owners to reach out for generating leads in transaction. The most important aspect of a private equity firm is that the funds raised are deployed and invested successfully.


In addition to this the employees of PE firm also put efforts into reducing transaction-related cost by excluding a middle man which can in turn be also used as private equity funding in bulk. The transaction professionals also try to maintain good terms with the auctioneers so as to get to know a deal first and hence a success in striking a good deal.

Portfolio Administration

This is the second most significant function of a PE firm. It is about PE professionals involved in an oversight and support to the firm’s other portfolio companies and their management teams. This includes supporting the management by walking these through some best practices in strategic planning and management of finances. Also these professionals aid their portfolio companies in institutionalizing new and innovative accounting practices and new IT systems in order to improve the worth of their actual investment.

It is also worth noting that with an availability of spectrum of preferences there are thousands of PE firms which have come into existence with different basic nature. However their functions more or less are the same.

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