PRIVATE EQUITY

Private equity strategies generally involve investing in companies that are not publicly traded on stock exchanges. These funds are pools of capital to be invested in companies that represent an opportunity for a high rate of return. They come with a fixed investment horizon, typically ranging from four to seven years, at which point the PE firm hopes to profitably exit the investment. Exit strategies include IPOs and sale of the business to another private equity firm or strategic buyer.

The private equity firms follow a standard practice of buying businesses and then, after steering them through a transition of rapid performance improvement, selling them. This strategy, which embodies a combination of business and investment-portfolio management, is at the core of private equity’s success.

Unlike traditional investments, private equity firms often take an active role in managing their portfolio companies. This involvement can include operational improvements, restructuring, and strategic planning.

Types of Investments

• Buyouts: Acquiring a controlling interest in a company, often through leveraged buyouts (LBOs), where debt is used to finance the purchase.
• Growth Capital: Investing in mature companies looking for capital to expand or restructure operations without changing control.
• Venture Capital: A subset of private equity focusing on early-stage startups with high growth potential.