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What is Private Equity Consulting?

Jim B.
By Jim B.
Updated May 17, 2024
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Private equity consulting is the process by which individuals or firms provide consulting services to investors wishing to partake in private equity investment. This type of investing is characterized by individuals providing funds to mid-market companies and receiving equity in those companies in return. Equity of this type becomes valuable to investors if the companies in which they invest grow their business as a result of the investment. Those who practice private equity consulting have expertise in matching up companies and investors in a mutually beneficial relationship.

Those who partake in private equity investment usually must invest a large sum of money to do so and take on a great deal of risk in the process. The investor runs the risk that the company in which he invests may struggle or even go under, in which case the investor can lose out on all of the capital that he invested. For that reason, there is a high demand for those with expertise in private equity consulting.

Since private equity usually takes place via firms that specialize in the practice, the benefits of private equity consulting are often built right into the investment itself. These investment firms employ business experts who know how to spot established middle market companies in need of a capital boost to get them through hard times or how to find up-and-coming companies in need of capital to fund a new business initiative or an improved marketing campaign. In addition, these consultants know how to spread the investment risk throughout many different companies.

In some cases, private equity consulting comes from firms that do consulting only. This means that they may offer advice to clients but don't actually manage their portfolios. On some occasions, these consulting firms may be contracted by investment firms that need extra manpower for research on a specific company. Consultants also work with individuals looking to get involved with private equity, helping them to spot opportunities that will attain those goals.

Generally, there are large amounts of money at stake for both companies and investors, so trusted private equity consulting is highly valuable. It's crucial that the right matches be made between investors and companies. For an investor, the equity she builds up in a certain company can be cashed out at a much higher value than the original investment if the business grows. The company would benefit if the capital obtained allows it to be more competitive and eventually qualify for even higher realms of funding.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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