# Private equity

Investor funds that buy companies outright, usually partly with debt.

On this site the phrase almost always means the other bidder. These funds raise money from institutions and wealthy families, then take control with a mix of that money and bank debt. They aim to sell in roughly three to seven years. So they price a business against what it will be worth to the next owner rather than against what it earns for its current one. That is why a fund can outbid a first-time buyer without either of them misjudging the business. It also cuts the other way at the end of your own hold: a fund already active in your trade is your competition today and one of the few plausible buyers when you sell.

In numbers: On $600,000 of [EBITDA](https://searchspheresource.com/glossary/ebitda), a fund bidding 6x offers $3.6M and a self-funded buyer bidding 3.5x offers $2.1M, which is the size of gap a [searcher](https://searchspheresource.com/glossary/searcher) usually loses a contested auction by.

Source: https://searchspheresource.com/glossary/private-equity
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