A short explanatory YouTube video by Adam Sand defining private equity as an investment approach that buys entire companies (not public stocks), holds them for several years (commonly three to seven years), employs leverage to enhance returns, and seeks to realize a return on invested equity when the business is sold.
What is private equity? It is an investment approach that is about buying entire companies, holding them for three, four, five, six, seven years, selling the entire company, and then generally using leverage to do that. You're not buying a stock, you're buying the entire thing. You're committed to holding it for a number of years, and you're using leverage to buy it, so you're more involved. The goal of these firms is they invest equity upfront and then when they sell the business, they get a return on their equity. That is, the return they generate is how the business performs. And when they put money in, when they take money out, at the end, when they sell it, how much did they earn?
