Private Equity

Extracted Attributes

• Definition

  Stock in private companies not offered to the general public.

• Capital Sources

  Large institutional investors, family offices, high-net-worth individuals, public pension funds, university and other endowments.

• Investment Goal

  To make a profit on investments, provide working capital, finance expansion, develop new products/services, operational restructuring, management changes, shifts in ownership and control, extract value.

• Nature of Capital

  Private capital for financing a long-term investment strategy in an illiquid business enterprise.

• Primary Investors

  Specialized investment funds, limited partnerships, private equity firms, venture capital funds, angel investors, institutional investors, high-net-worth individuals.

• Regulatory Context

  Linked to critiques of Accredited Investor Rules, which some argue unfairly prevent average citizens from participating.

• Investment Strategies

  Leveraged buyouts (LBOs), venture capital (VC), growth capital, distressed investments, taking controlling interest, minority investments.

• Typical Holding Period

  3 to 5 years, with a long-term average around 4 years.

• Performance vs. Public Equity

  Mixed evaluations; some find it outperforms, others find otherwise.

Private equity

Private equity (PE) is stock in a private company that does not offer stock to the general public; instead it is offered to specialized investment funds and limited partnerships that take an active role in the management and structuring of the companies. In casual usage "private equity" can refer to these investment firms rather than the companies in which they invest. Private-equity capital is invested into a target company either by an investment management company (private equity firm), a venture capital fund, or an angel investor; each category of investor has specific financial goals, management preferences, and investment strategies for profiting from their investments. Private equity can provide working capital to finance a target company's expansion, including the development of new products and services, operational restructuring, management changes, and shifts in ownership and control. As a financial product, a private-equity fund is private capital for financing a long-term investment strategy in an illiquid business enterprise. Private equity fund investing has been described by the financial press as the superficial rebranding of investment management companies who specialized in the leveraged buyout of financially weak companies. Evaluations of the returns of private equity are mixed: some find that it outperforms public equity, but others find otherwise.

Web Search Results

• Private equity firm

  A private equity firm or private equity company (often described as a financial sponsor) is an investment management company that provides financial backing and makes investments in the private equity of a startup or of an existing operating company with the end goal to make a profit on its investments. The target companies are generally privately owned entities (not publicly listed),( but on rare occasions a private equity firm may purchase the majority of a publicly listed company and delist [...] Private equity firms characteristically make longer-hold investments in target industry sectors or specific investment areas where they have expertise. Private equity firms and funds differ from hedge fund firms which typically make shorter-term investments in securities "Security (finance)") and other more liquid assets within an industry sector, with less direct influence or control over the operations of a specific company. Where private equity firms take on operational roles to manage risks [...] To complete its investments, a private equity firm will raise funds from large institutional investors, family offices and others pools of capital (e.g. other private-equity funds) which supply the equity. The money raised, often pooled into a fund, will be invested in accordance with one or more specific investment strategies including leveraged buyout, venture capital, and growth capital. Although the industry has developed and matured substantially since it was invented, there has been

• What is Private Equity Deal: Structure, Flow, Process (Guide)

  Private equity is a broad term used for investing in companies that are not publicly listed on a stock exchange. While most typically, the term refers to takeovers of companies, which are then structured as limited partnerships, private equity is also used as an umbrella term for investments such as leveraged buyouts (LBOs), venture capital (VC), and distressed investments. [...] The explicit goal of private equity investing is usually to extract value from the target companies that others haven’t seen. While the initial evaluation of investment opportunities may seem to happen quickly, the materialization of private equity deals could take a few months or even a year. [...] The private equity investment cycle refers to the period in which the private equity fund manages the company. A typical holding period is three to five years, with the long-term average holding period for private equity funds being around four years.

• Private equity - Wikipedia

  Private-equity fundraising refers to the action of private-equity firms seeking capital from investors for their funds. Typically an investor will invest in a specific fund managed by a firm, becoming a limited partner in the fund, rather than an investor in the firm itself. As a result, an investor will only benefit from investments made by a firm where the investment is made from the specific fund in which it has invested. [...] Although the capital for private equity originally came from individual investors or corporations, in the 1970s, private equity became an asset class in which various institutional investors allocated capital in the hopes of achieving risk-adjusted returns that exceed those possible in the public equity markets. In the 1980s, insurers were major private-equity investors. Later, public pension funds and university and other endowments became more significant sources of capital. For most [...] institutional investors, private-equity investments are made as part of a broad asset allocation that includes traditional assets (e.g., public equity and bonds "Bond (finance)")) and other alternative assets (e.g., hedge funds, real estate, commodities).

• Private Equity Funds | Investor.gov

  When you invest in a private equity fund, you are investing in a fund managed by a private equity firm—the _adviser_. Similar to a mutual fund or hedge fund, a private equity fund is a pooled investment vehicle where the adviser pools together the money invested in the fund by all the investors and uses that money to make investments on behalf of the fund. Unlike mutual funds or hedge funds, however, private equity firms often focus on long-term investment opportunities in assets that take time [...] A typical investment strategy undertaken by private equity funds is to take a controlling interest in an operating company or business—the _portfolio company_—and engage actively in the management and direction of the company or business in order to increase its value. Other private equity funds may specialize in making minority investments in fast-growing companies or startups.

• 10 Top Private Equity Firms by Total Equity

  Private equity firms manage investment capital obtained from institutional investors or high-net-worth individuals (HNWIs) to acquire equity ownership of companies through a variety of strategies, including leveraged buyouts and venture capital. Private equity firms operate with long-term investment horizons, typically five to seven years. [...] After obtaining an equity interest in a company, the private equity firm looks to eventually profit through either selling the company outright or through an initial public offering (IPO). When especially large investments are required, these firms often partner with other private equity firms to raise the necessary capital and to reduce their risk. Most firms specialize in one or more industries or investment strategies where they have particular expertise.