What Is Private Equity ?

Private Equity is money invested into a private company, or the privatization of a company through the external funds. Basically, what private equity firms attempt to do is to invest into a company, take a majority stake, improve the company and then exit their investment at a large profit. In order to enlarge profits, PE firms make use of leverage (borrowed money) to conduct Leveraged Buyouts (LBOs).

Private equity is a source of investment capital from high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. Partners at private-equity firms raise funds and manage these duties to yield favorable returns for their shareholder clients, typically with an investment prospect between 3 to 5 years.

These funds can be used in purchasing shares of private companies, or in public companies that eventually become delisted from public stock exchanges under go-private deals. The minimum amount capital required  for investors can vary depending on the firm and fund raised. Some funds have a $250,000 minimum investment requirement; others can require millions of dollars

What are the process ?

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Step 1

Fundraising
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Step 2

Screening for and making investments
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Step 3

Managing investments and portfolio companies
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Step 4

Exit strategy

Normal Investment Stage

2007 2008 2009 2010 2011 2012
SEED 3% 3% 2.8% 2.4% 5.86% 0.20%
START UP 2% 1% 6.3% 2.8% 0.75% 5.45%
EARLY STAGE 19% 17% 14.8% 26.9% 38.59% 16.58%
EXPANSION 66% 62% 53.1% 38.7% 46.58% 45.33%
Mezzanine / PreIPO 3% 13% 17.5% 29.2% 8.22% 32.44%
OTHERS 7% 4% 5.5% 0% 0% 0.00%
 

What is Exit Strategies & opportunities ?

  • Hedge Fund
  • Venture Capitalist
  • Joining a Corporate / Portfolio company
  • Venture Capitalist
  • Secondary Funds, Fund of Funds
  • Trade sale / M&A

What type of portfolio companies do we invest in ?

  • Have significant potential for growth
  • Are struggling and badly need of repairs
  • Are not living up to their full potential