This blog is intended to provide you brief information about what private equity is and how it can create value for your business. Along with this, you will be gaining insight into the methods behind private equity transactions, and how they are used to generate returns.
Let’s first understand what private equity is all about
In today’s thriving financial marketplace, Private Equity (PE) has stealthily gained a great amount of influence.
Well, the simplest way to define it would be as an equity that is not quoted on a public exchange. Actually, private equity comprises of individuals and firms that are interested in making investment in private firms or perform buyouts of public investment.
This is all done in order to achieve a positive return on investment. Most of the private equity industry includes large institutional funds such as pension funds, and large private equity firms that are basically funded by a group of accredited investors.
The main motive of the private equity investment is to gain a significant influence over the firm’s operations. In the case of private equity funds, accredited investors can only access private funds.
How equity investments create value
The most common investment strategies are leveraged buyouts and venture capital investments. Venture capital refers to taking equity investment in an organization in a growing industry. Further, under leveraged buyouts an organization is purchased by a private equity firm. The purchase is financed through debt collateralized by the target firm’s operations and assets.
By leveraging the investments private equity firms aim to amplify their potential return.
In a nutshell
The private equity industry is growing rapidly, facilitating a great way to fundraising. If you want to know more about this method of fundraising, approach reputed financial institutions like Challis Capital, which has a great network of high-net-worth private equity investors.