Private Equity Buy Out of Companies to Hit $1 Trillion

About $1 trillion are would have been invested by private equity firms on buying companies and this could affect things including groceries and health care.

Private equity firms are those firms of Wall Street that buy big companies with huge debt burdens and rebuild them before selling for a big profit.

“Many people may be familiar with a company called Spanx,” said Drew Maloney, who heads the private equity trade association the American Investment Council.

The grocery chain Albertson’s and the dating app Bumble are also owned by private equity firms.

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“The investors are largely pension funds across America, endowments, college endowments, private endowments,” Maloney said according to Market Place. And that is where they get their money from.

The biggest private equity players combine that investor money with lots of debt, which the company they buy is expected to pay back.

That’s partly why private equity is thriving right now, said Burcu Esmer at the University of Pennsylvania’s Wharton School. “It is mostly because the interest rates have been low.”

“There are many potential candidates to be bought. And when you think about companies, if it’s family-owned businesses, these are the baby boomers and they are retiring,” Esmer said.

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