Master the types of private equity within your reach before you hurriedly rush to close a business deal
Stocks are tanking, commodities are falling, share prices are declining, while the US dollar is rising and hiking at a rate never seen before. Which is the best professional management for hire that runs portfolio companies that maximize profits and return on investments?
Did you know? The access to the purchase of public company shares by an entity, not a publicly traded corporation, could be the answer you’ve been waiting for?
Introduction
First, let us get a basic understanding of private equity.
What is private equity? Its a form of investment that is typically not open to the general public.
There are varied types of private equity investments made by large organizations such as pension funds, endowments, and insurance companies. These types of investors often have a long-term investment horizon because they are investing other people’s money.
A private equity firm may invest in a variety of companies including those that are publicly traded on stock exchanges as well as those that are privately held. The transaction involves the purchase of a majority shareholding, but can also be much smaller, with only one share or less.
Types of private equity deals structures
The private equity market is the process of financiers and investors giving money to start-up companies, with the expectation that these companies will grow and eventually be acquired by other companies.
Different types of private equity strategies mirror the several types of private equity funds that invest five to six years. They are categorized as leveraged buyouts, venture capital funds, growth capital, fund of funds, and real estate private equity.
Private equity types of investment include hedge funds, management buyouts, infrastructure, mezzanine capital, distressed private equity, or secondaries.
The broad 3 types of private equity are growth equity, venture capital, and
- Venture capital is a type of private equity that invests in startups with the expectation that they will soar and be profitable.
- Buyout capital are part of the types of private equity that buy existing companies with the goal of making them more profitable.
- Leveraged buyout is a type of private equity that borrows money to buy an existing company and then uses the company’s assets to repay the debt.
Private Equity, Hedge Funds, Mutual Funds, and Investment Trusts make up types of private equity funds. Private equity differs from most traditional investment vehicles in that there are no public market disclosures about its investments or returns. The private equity market is controversial because it has been shown to contribute significantly to the global economy with more capital raised than in public markets each year for over a decade with no signs of a change in the trend.
What are the sources of capital for all types of private equity deals?
Private equity firms raise capital for their deals by getting institutional investors or by seeking out angel investors.
The advantages of institutional capital are that they are more stable and have a higher level of knowledge. However, they are also more expensive and the decision-making process is slower.
Angel investors, on the other hand, are less stable but cheaper and faster with their decisionpmaking processs.
Profitable exit strategies for private equity investments
Exit strategies are a crucial part of private equity investments. The different types of private equity firms carefully plan their exit strategy prior to investing in a company. The exit strategy is the most important part of the investment decision process because it determines the return on investment that investors will get.
Exit strategies are ways that a company can get out of the various types of private equity investments.
There are many different exit strategies available for private equity investments by a stealth entrepreneur, but some are more common than others.
Divestitures vs liquidations
Exit strategies can be classified into two categories: divestitures and liquidations. Divestitures involve selling off company assets while liquidations involve selling the company as a whole to another firm or individual.
Initial Public Offering (IPO) vs Mergers & Acquisitions (M&A)
IPO is when the company lists its shares on a public stock exchange, enabling investors to buy and sell shares in the company. The IPO process can be risky, as it involves increasing exposure to market volatility and uncertainty.
M&A is another common exit strategy for private equity investments. This is when one company buys another company, often in order to expand their business or take over their market share. The top reasons why companies choose M&A as an exit strategy are increased efficiency from combining resources or being able to offer more products or services under one roof than they could before due to synergy effects with the combined businesses.
List of private equity firms
Private equity firms raise money from very high-net-worth individuals (VHNWI), as well as mutual funds, insurance companies, and pensions. Some examples of private equity firms include The Blackstone Group Inc, KKR & Co. Inc, CVC Capital Partners, and The Carlyle Group Inc.
Thus private equity offer a broad range of opportunities.
FAQ
How do you attract private equity?
- Is your business is underperforming relative to other companies in the same industry?
- How strong is your position or brand within your niche market?
- Are you generating consistent profits (or profitable)
- Do you receive a reliable cash flow?
- Is your management team effective?
Question of the day
Where do you get real-time market information and a full view into the private markets to stay ahead of your competition?
Share with us in the comments section.
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For more research
- Latest tracking of 2.9 million private, midsized companies & large enterprises and companies actively raising capital from venture capital firms, private equity, or other investors. | IncFact
- Value of funds raised by largest private equity firms worldwide from 2015 to 2020 Statista
- Private markets fundraising Mckinsey
- 3 Key Types of Private Equity | HBS Online – Business Insights Blog
- The Nine Types of Private Equity | Wealth Management
Read more
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