Private equity, if put in the most simple terms, is equity held in a private business. Top Private equity firms in India are run by an array of partners who invest money that are raised by investors. These investors are the people who work for a limited amount of time and thus are also called limited partners.

Private equity firms are also referred to as buoyant firms, and for a few right reasons, too. PE firms usually buy the entire company unlike venture capital firms which do not typically buy entire organization. They also have their hands in controlling interests. Private equity funds in India are more of a leveraged buyout firm. Most PE firms put up only a slight portion of the capital required to purchase a target, while the remainder comes from a loan from a bank.

How long Private Equity and venture capital date back to?

LBOs were established on the Wall Street in the late 1970s and early 1980s when they were created as a method of leveraging a company with debt equity and equity capital in order to buy it. It was a notably high profile financier, Michael Milken, who created them. In ways more than one, today's private equity is yesterday's LBO firm.

However, there is a clear delineation between a private equity firm and a private equity fund. The PE firm is the sponsor and is often referred to as the general partner of several individual PE firms. Each fund, on the other hand, has its own limited partners which are not restricted to just individual accredited investors.

The practise of people pooling in their money to purchase stakes of a private company is not a new thing, though. It is, in fact, considered to be as old as capitalism itself. Massachusetts Bay Company was one such early prototype of the private equity model that set pulled together the concept of pooling money to help the British North American Colonies. Settlers who were sent to New American colonies helped build up the economy while the ones who stayed in England funded the venture, hoping for a return on their investment.

Major banks these days buy controlling interests, restructure business operations, help eliminate corruption and deceit. All these now are present day components of private equity's modus operandi- the what's, how's and when's of a Private Equity firm's functions.

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