Private equity refers to investment of capital in companies in exchange for certain level of ownership in the company. Generally, Private equity goes in to those companies that are moderately mature yet finding difficulty to increase profit. The capital infused in such companies give a boost to the operation and financial support to the company thus trade off of ownership with capital seems justified.

From Private Equity(PE) point of view, the investors find these companies to be very promising and believe that the products or service offered is a profitable business in near future and thus they participate in the company by providing financial support. For example, someone who wants to invest for 20% equity means they want to give you cash to use in the business, but they want 20% of ownership. So if your business makes profits, they will receive 20% of profit also.