{"id":4817,"date":"2023-07-07T14:30:00","date_gmt":"2023-07-07T18:30:00","guid":{"rendered":"https:\/\/theforage.wpengine.com\/?p=4817"},"modified":"2024-12-05T16:55:30","modified_gmt":"2024-12-05T21:55:30","slug":"private-equity-vs-investment-banking","status":"publish","type":"post","link":"https:\/\/theforage.wpengine.com\/careers\/private-equity-vs-investment-banking","title":{"rendered":"Private Equity vs. Investment Banking: What’s the Difference?"},"content":{"rendered":"\n

When companies want to raise funds, they often turn to investment banks and private equity firms to help them. The difference between private equity vs. investment banking is that private equity primarily focuses on private companies \u2014 the firm invests in a company and gains some control over that company’s decisions moving forward. On the other hand, investment banks offer a broader range of financial services<\/a> and typically work with large corporations and public companies.\u00a0<\/p>\n\n\n\n

If you\u2019re interested in a finance career, both of these industries offer lucrative career paths \u2014 but there can be significant differences in their work environments. In this guide, we\u2019ll walk through the main differences between private equity vs. investment banking and how to figure out which one is right for you.<\/p>\n\n\n\n

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Jump to Private Equity vs. Investment Banking<\/strong>: Which One Is Right for Me? Quiz<\/strong><\/a><\/div>\n<\/div>\n\n\n\n

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What Is Private Equity?<\/h2>\n\n\n\n

Private equity (PE) is money controlled by a private equity firm. Firms invest these funds in private companies or companies not publicly traded on stock exchanges. <\/p>\n\n\n\n

“PE firms typically raise capital from institutional investors<\/a>, such as pension funds, endowments, and high-net-worth individuals, to form investment funds,” says Ryan Niddel, CEO at MIT45. <\/p>\n\n\n\n

Some firms focus on venture capital<\/a> investments, investing in early-stage or start-up companies. Other firms may perform buyouts in which they purchase a private company outright or make growth equity investments into established and expanding businesses. When choosing where to invest, private equity firms usually specialize in a particular industry or sector, such as health care<\/a> or real estate. <\/p>\n\n\n\n

“Private equity firms often take an active role in managing the companies they invest in, implementing operational improvements, strategic changes, and cost optimizations to enhance profitability,” says Niddel.<\/p>\n\n\n\n

>>MORE:<\/strong> Learn more about private equity<\/a>.\u00a0<\/p>\n\n\n\n

How Do Private Equity Firms Make Money?<\/h3>\n\n\n\n

Private equity firms typically employ a few key investment strategies to generate revenue. Their goal is to buy or invest in a company, grow it, then sell it.<\/p>\n\n\n\n

Leveraged buyouts happen when PE firms use a combination of equity and significant debt to acquire companies. Growth equity is when PE firms invest in established but growing companies, typically taking a minority stake. <\/p>\n\n\n\n

To grow a company, a PE firm might: <\/p>\n\n\n\n