Private equity is a term used to describe investment in private companies. It covers a wide spectrum from start-up companies to large buy-outs capitalised at over £1bn. The main sub-sectors of the private equity market are venture capital, which covers early stage investing, and buy-outs, which covers management buy-outs, buy-ins and similar transactions. Graphite Capital's focus is on the buy-out market.

Buy-out investments generally involve the purchase of entire, well established companies. The sellers may be the founders or other individuals, or they may be larger companies seeking to divest subsidiaries. Quoted companies are also bought by private equity investors in public-to-private transactions. Buy-out investments are structured with a higher level of debt than quoted companies, using senior bank debt and sometimes mezzanine debt. Private equity investors provide the remainder of the funding in the form of equity and equity-related investments. These both carry the greatest risk in the structure and earn the highest return when investments are successful.

There is less short term performance pressure on private equity investments, making it possible to adopt a longer term approach. When companies are eventually ready for disposal, they may be sold to trade or financial buyers, or they may be floated on the stock market.