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Industries · Financial services

Private equity and venture capital

How private equity and venture capital funds raise money, charge fees and carried interest, buy and grow companies, and sell them; how a leveraged buyout creates returns; and why private equity firms are some of the largest clients of consulting firms, through commercial due diligence and value creation work.

30 min3 lessons Last reviewed
Start lesson 1 How private equity and venture capital funds work

Key takeaways

  • A private equity (PE) firm raises a fund from investors, buys companies, tries to make them more valuable over a few years, and then sells them.
  • In a leveraged buyout, the fund pays for a company with some equity and a lot of debt.
  • Private equity cases test two things at once: whether the market and the company are attractive, and whether the price and the plan can deliver the return the fund needs.
By the end you will be able to
  • Explain how a fund works: general partners, limited partners, commitments, fees, and carried interest
  • Build simple leveraged buyout returns: entry, debt, exit, MOIC, and IRR
  • Split returns into earnings growth, multiple change, and debt paydown
  • Explain commercial due diligence and why private equity hires consultants
  • Explain venture capital returns and crack typical private equity cases

Lessons

1

How private equity and venture capital funds work

Who gives the money, how funds are set up, fees and carried interest, the deal cycle, and why private equity hires consultants.

7 min
2

LBO returns and fund economics

Work through a simple leveraged buyout, split the returns into their sources, and calculate fees and carry.

10 min
3

Private equity and venture capital: players, trends, regulation, and how to crack the cases

Examples of firms by region, what changed from 2024 to 2026, venture capital math, regulation basics, and typical case prompts.

13 min

Worked cases in this module

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Key terms