What is a private equity firm and do people who work in them make a lot of money?
Please explain =)
- Anonymous1 decade agoFavorite Answer
Private equity means non-public investment. It is a very lucrative business because the number of investors is limited and the profits can often be 2-3x invested capital. The people who work for them recieve a % of the profits on the deals. It really comes in 3 common forms: Buyout, Venture Capital, and Mezzanine/Specialty Finance. Here's a quick run down of the 3 segments:
Buyout: Buyout firms raise investor capital and use that capital to acquire private companies, divisions of larger companies, or public companies. These firms seek to uncover operational and pricing inefficiencies that they believe they can fix, unlocking the true value of a target company and then repositioning it for sale at a multiple of their invested capital. Typically buyout firms have full control of the acquired company and control all aspects of the financial and operational strategy. Examples of these companies include: Blackstone, Bain & Co., Carlyle, and KKR.
Venture Capital: Seek to invest in companies that are in the very early stages of development that may need seed capital and guidance to help establish their business. They focus most often on companies that provide innovation to an industry, targeting industries such as information technology or biotechnology. Examples of these companies include: Sequoia Capital, General Catalyst Partners, Kleiner Perkins Caufield & Byers, and Balderton Capital.
Mezzanine/Specialty Finance: Mezzanine Financing is an alternative debt investment. This type of financing is most often provided to small growing companies, or larger struggling firms that may not be able to raise capital through more traditional avenues. Mezzanine financing is traditionally provided by venture capital firms or alternative lending institutions to assist in the expansion of an established company. It is often referred to as a “bridge loan.”
All these firms raise funds from investors who meet SEC guidelines for Qualified Purchasers and the funds are used to invest in the companies. You can find the definition for qualified purchasers here: https://www.aurorallc.com/def/qp.asp
- 4 years ago
a private fairness agency is equivalent to a mutual fund contained in the component that that is a pool of money from traders. this way of agency isn't opened to the prevalent public. that is composed of what's termed authorized traders. An authorized traders is defined with coaching from sec regualtions. They actually are severe information superhighway well worth persons. inner most fairness companies are literally not regulated with coaching from the sec. they can make investments in some thing they prefer. Their investments are literally not constrained like mutual money. because of this they're limitied to severe information superhighway well worth persons who're think to be making an investment savvy. sometimes they purchase out total organizations. the organizations are often vast or small. The fairness agency is attempting to make investments the position ever they fell they can get the suited go back on their funding.