Private equity (PE)

What is private equity (PE)?

Private equity (PE) refers to investment firms that buy controlling or large stakes in private companies with investor money and debt, improve them, and sell them, usually within several years. A firm raises a fund from institutions such as pension funds, insurers and endowments, buys companies with it, works with management on growth and margins, then sells to a strategic buyer, another fund or the public markets.

Why it matters to a revenue leader

A PE owner buys a company on an investment case, and growth is usually at the center of it: in a survey of PE investors, increasing revenue was named as a source of value in over 70 percent of deals. That puts the CRO's plan inside the case the firm used to justify the price. The clock is fixed, so a year spent rebuilding the sales team is a year of the hold. In a PE-backed commercial services company, the owner watches agreement revenue, renewals and pricing as closely as new bookings, because those numbers shape the exit price.

A fund buys a fire and life safety inspection company with 18 sellers. The investment case assumes service agreement revenue grows faster than project work and that two regional competitors get acquired. The new CRO's first board update is read against that case, line by line.