Private equity financing aims to fill the gap between internally generated financing and conventional market sources such as bank loans and public equity. It is risk capital provided outside public markets to companies with high levels of growth potential, start-ups, young companies at an early stage of development and, in some cases, companies that require a financial turnaround. Unlike most stock market investors, private equity investors typically acquire significant equity stakes that entail control rights and the right to nominate directors. As a result, they adopt a more hands-on approach when managing their investments.
