Private Equity Questions Answered

What is private equity, how do private equity firms make money, and what really happens when private equity buys a company? Below are the questions people ask most about private equity, from how PE funds work to leveraged buyouts, selling a business, exits, and investing. Each one is answered by the people doing the deals on The PE Podcast.

Private Equity Basics

1. What is private equity?
2. What is private equity in simple terms?
3. Private equity vs. venture capital: what's the difference?
4. Private equity vs. hedge funds: what's the difference?
5. How do private equity firms make money?
6. What does "2 and 20" mean in private equity?
7. How does a private equity fund work?
8. What is a GP and an LP in private equity?
9. How long does a private equity fund last?
10. What does a private equity firm actually do?
11. Why is private equity so popular right now?
12. Is private equity good or bad?
13. Why does private equity have a bad reputation?
14. What is the lower middle market in private equity?
15. What is growth equity?

How Private Equity Deals Work

16. How do private equity firms find companies to buy?
17. What do private equity firms look for in a company?
18. What is a leveraged buyout (LBO)?
19. How does a leveraged buyout work, step by step?
20. How much debt do private equity firms use in a deal?
21. What is a platform company in private equity?
22. What is a buy-and-build strategy?
23. How do private equity firms value a business?
24. What EBITDA multiple do private equity firms pay?
25. What happens during private equity due diligence?
26. What is a quality of earnings (QoE) report?
27. How long does a private equity deal take to close?
28. What is a letter of intent (LOI) in M&A?
29. Why do private equity deals fall apart?
30. Besides price, which deal terms matter most?

Selling Your Business to Private Equity

31. Should I sell my business to private equity?
32. How do I know if my business is ready to sell to private equity?
33. How much will private equity pay for my business?
34. What is the minimum EBITDA private equity firms look for?
35. What happens when private equity buys your company?
36. Do owners stay on after a private equity acquisition?
37. What is rollover equity?
38. What is a recapitalization?
39. What is the "second bite of the apple" in private equity?
40. How do earnouts work when you sell a business?
41. How do I prepare my business to sell to private equity?
42. Do I need an investment banker to sell my business?
43. Private equity buyer vs. strategic buyer: which is better?
44. What happens to employees when private equity buys a company?
45. How do I choose the right private equity partner?
46. What mistakes do owners make when selling to private equity?

After the Deal: How Private Equity Creates Value

47. How do private equity firms add value to companies?
48. What is a 100-day plan in private equity?
49. What does an operating partner do in private equity?
50. How do management incentive plans work in private equity?
51. What KPIs do private equity firms track?
52. How is private equity using AI in portfolio companies?
53. Why do private equity firms cut costs after an acquisition?

Private Equity Exits

54. How do private equity firms exit their investments?
55. How long do private equity firms hold a company?
56. What is a secondary buyout?
57. What is a continuation fund?
58. What is a dividend recap?
59. IPO vs. sale: how do private equity firms choose an exit?

Investing in Private Equity

60. How do you invest in private equity?
61. Can individual investors invest in private equity?
62. What is an accredited investor?
63. How do LPs choose private equity funds?
64. What returns does private equity generate?
65. IRR vs. MOIC: which matters more?
66. What is a co-investment in private equity?
67. How do family offices invest in private equity?
68. What is an independent sponsor?
69. What is a search fund?
70. How does private credit work with private equity?
71. What are private equity secondaries?

The Private Equity Industry and Careers

72. How do interest rates affect private equity?
73. What industries is private equity investing in right now?
74. Is private equity deal activity picking up?
75. What is dry powder in private equity?
76. How is AI changing private equity?
77. How do you get a job in private equity?
78. What skills do you need to work in private equity?
79. What is the biggest misconception about private equity?

Private Equity Terms Explained

80. What is EBITDA?
81. What is adjusted EBITDA?
82. What are add-backs?
83. Enterprise value vs. equity value: what's the difference?
84. What is carried interest?
85. What is a hurdle rate?
86. What is a management fee in private equity?
87. What is a capital call?
88. What is a distribution waterfall?
89. What is a vintage year?
90. What is the J-curve in private equity?
91. What is IRR?
92. What is MOIC?
93. What is DPI?
94. What is TVPI?
95. What is a working capital peg?
96. What is reps and warranties insurance?
97. What is a seller note?
98. What is unitranche debt?
99. What are debt covenants?
100. What is a roll-up strategy?
101. What is a GP-led secondary?
102. What is a holding company (holdco)?

The PE Podcast is for informational and educational purposes only. Nothing discussed is investment, legal, tax, or financial advice, or an offer or solicitation to buy or sell any security or fund interest. Views expressed by guests are their own.