Buyout vs Growth Private Equity: What Is the Difference?

A buyout means a private equity fund buys most or all of a company, taking full control of how it is run. This often involves using a mix of the fund's own money and borrowed money, similar to how a large loan is used to buy a property.

Once in control, the fund typically works to improve the company, whether through cutting costs, changing strategy, or growing revenue, with the goal of eventually selling the company for more than it paid.

Growth private equity means buying a smaller, minority stake in a company, without taking control of how it is run. These companies are usually already growing and often already profitable or close to it.

Instead of changing how the company is run, growth PE investors typically provide capital and support to help the company expand faster, while the existing management team continues to lead the business.

A buyout carries the added risk of borrowed money: if the company struggles, the debt used to buy it still needs to be repaid, which can add pressure during difficult times.

Growth PE avoids much of this borrowed-money risk, since it typically does not use debt to make the investment, but it also has less control if the company's existing management makes decisions the investor disagrees with.

Buyouts tend to fit companies that are stable but could be run more efficiently, where a hands-on owner can add real value through better management or strategy.

Growth PE tends to fit companies that are already doing well and mainly need more capital and light support to keep growing, rather than a change in how they are managed.