Financial - Private Equity Opportunities

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This product is available to Accredited and Eligible Investors. This product is available to Accredited and Eligible Investors.
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Private Equity Overview

In a private equity investment structure, capital is invested into businesses in exchange for partial or full ownership of that company. This ownership is called equity. Unlike other types of equity investments, private equity generally focuses on acquiring ownership in mature businesses that operate in traditional business sectors. These businesses are not listed on public stock exchanges. The goal of private equity is to invest in companies that will increase in value over time, before eventually selling the company for a profit. Often, private equity firms will buy a majority stake of the companies they purchase (> 50% ownership) and can hold majority ownership of several companies at the same time. Money to purchase equity in these companies is raised from the contributions of limited partners, who are investors with a limited amount of risk. Private equity firms raise capital from these limited partners to create a pool of money which becomes the “private equity fund”. Once the fund hits its fundraising goal, they close the fund to new investors, and go invest the money into companies they believe have growth potential. Finding companies to invest in is one of the most important functions of a private equity firm, and the process is usually grueling and very thorough to find worthy investments. Typically, only a fraction of companies that are explored by the private equity firm are approved for investment. One of the primary functions of a private equity firm is to improve the profitability of the acquired companies, in order to add value to the business. For this reason, private equity firms often target companies that they believe are underperforming or have operational inefficiencies that the expertise of the firm can help fix. The private equity firm continues to hold these companies and work with them to appreciate their value until the investment horizon occurs. The investment horizon is a predetermined length of time the private equity firm plans to hold an acquired company before selling it, usually between 4 and 7 years, although these timeframes can vary. Once the horizon hits, the firm sells the company to another company or investor and hopes to realize a profit on the sale price. These proceeds of the sale are then distributed back to the limited partners who invested in the fund, allowing them to realize a profit as well. Some private equity funds will pull a ‘performance fee’ from payouts to investors, based on how well the firm was able to grow the value of the acquired company.

Another branch of private equity investing is venture capital. Venture capital firm employ the same techniques as private equity firms, nut instead of investing in mature business, they focus on acquiring young or start-up companies in less developed industries. Today, a great deal of venture capitalism focuses on technology and SaaS (Software as a Service) firms. The venture capital firm is often able to help improve access to capital and other resources for the young company and can provide guidance and leadership to assist with growth.


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