Investors in private equity are typically institutional investors such as pension funds, insurance companies and endowments, as well as high net-worth individuals. These investors are commonly referred to as “limited partners”; they have limited liability, but also limited control over the management of the funds.

A leveraged buyout is a lot like buying a house with a mortgage. With a down payment of 20 percent in cash, an individual can get a mortgage for the remaining 80 percent of the cost of the house, using the house itself as collateral.

Like all sophisticated companies, private equity firms aggressively manage the tax liabilities of their own firms and those of their portfolio companies.

There is little reliable quantitative analysis about the private equity buyout industry’s impact on job creation. As Business Week bluntly notes, however, “buyout shops have always been associated with job losses.” Even industry studies that make bold claims that buyouts are creating jobs acknowledge that in many cases jobs are lost.

There are a number of practices of private equity buyout firms that are creating widespread concern among public policy-makers, securities markets, and other stakeholders.

One of the reasons private equity has gotten so much attention is the increasing frequency with which large publicly traded companies are going private in leveraged buyouts. According to The Wall Street Journal, eight of the 10 largest buyouts ever in the United States were announced in the last 12 months.

Some of the biggest deals are beyond the purchasing power of any one firm; increasingly, private equity firms are joining together for specific transactions. These “club deals” allow the firms to share risk and purchase ever larger companies.