Private Equity Firm

Private Equity

What Is Private Equity?

Private equity are funds investors use to purchase shares in private companies. Also, It can be described as the shares outside the stock exchange.

Private equity can be provided by angel investors, venture capitalists and other investment institutions.

Who is A Private Equity Analyst?

A private equity analyst is a person who conducts research and forecast the return-on-investment (ROI) of a company by ratio analysis.

What Are Private Equity Firms?

Private equity firms are investment management institutions set up to raise funds from different sources and invest into buying and selling of businesses for profit.

What is a private equity firm?
Understanding How Private Equity Firms Works

What Do Private Equity Companies Do?

Private equity companies are usually formed by investors who want to directly invest in companies rather than buying stocks. The goal of the private equity firm is to buy highly profitable companies with growth potential

How Do Private Equity Firms Work?

Companies that are acquired by private equity firms are considered as portfolios to the firm. The private equity firm controls the acquired company by representing its members as board of directors in the acquired company.

Private Equity Funds For High-Tech Companies

How Do Private Equity Firms Raise Funds?

Private equity firms raise funds through several mediums, The list below shows the most common methods private equity firms use :

  1. Public Pension Funds
  2. Corporate Pension Funds
  3. Insurance Companies
  4. High Net worth Individuals
  5. Family Offices
  6. Endowments
  7. Foundations
  8. Funds – of – funds
  9. Sovereign Wealthy Funds. etc.

What Is The Difference Between Private Equity and Venture Capital?

A private equity firm usually buys 100% of the companies they invest in, as a result they control the entire company after buyout. Private equity firms also use cash and debt in their investment while venture capitalists deals with equity only.

Related: read the History of equity and venture capital on wikipedia

What Do Private Equity Firms Invest In?

Private equity firms invest in almost all types of profitable businesses. This includes startups, mid-stage companies and late stage companies. Industries private equity firms invest in includes Agriculture, High-Tech, Clean Energy, Hospitality, Finance, etc

How Private Equity Firms Can Help You

Here are 5 common scenarios private equity firms can help your company:

  1. Capital for Expansion: As successful business owners grow, funds becomes a greater need but with the help of a reputable firm you can expand and take your business to the next level.
  2. Buyout Existing Investors: In some cases investors who have their money tied up for 5 years or more in a privately held company can become “Tired investors”. In this scenario, the underlying company must show a positive financial projection before the buyout can be doable.
  3. Payout The Founder or Owner: It is also possible for only the founder to be bought out while keeping the old investors. This often happens when the founder wants to move on, due to illness, divorce etc. Typically, investors are very interested in this kind of option especially when there is a controlling stake available.
  4. Buyout The Company: The great thing about private equity firms is that, they have large amounts of cash on hand. They create no uncertainty for founders because they can buy 100% of the company, cash outing out previous investors, shareholders and founders. In some cases thy may retain the founder to continue to manage the business but they can also use the funds install a new senior management and board of directors.
  5. Restructure A Struggling Business: Private Equity Firms can provide adequate capital to help a profitable business restructure its business if it shows a near turn around.

Related: Employee Stock Option Plan (ESOP)

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