The corporate raiders of the private-equity (PE) industry have been memorably compared to invading barbarians. But the industry is more usefully described as a machine, which converts investors’ money into deals, deals into profitable divestments (or “exits”), and exits into investor returns. When running well, this contraption gathers a momentum of its own. Profitable exits generate handsome returns, which tempt investors to pump in more capital, enabling further dealmaking.
