Introduction
Private equity means the investment made in private
companies or buying out public companies by taking them out of stock exchange. According
to Peng, "The market for private equity focuses on using funds borrowed
from private sources to buy out existing shareholders and make a firm private."
Private equity has been controversial due to its advantage and disadvantages.
Critics from developed countries have been against private equity since they
argue it brings income equalities, exploit the resources and cut down the job
opportunities. But in emerging markets like China, it is well accepted due to
value-adding technique and value-added resources.
The private equity ensures the investment and its return on
investment creating higher values for the shareholders. They work on maximizing
the profit with skilled and experienced investor and appointment of the employees
of highly qualified candidates. They create a financial discipline in the
system to increase the profit and decrease the unnecessary expenses. Private
equity work for long-term basis so that the investor gets more secured returns
with less risk and capital preservation techniques.