Can someone simply explain what Private Equity is?What is does? and how it does it?
Im interested in Investment banking and am starting to learn about private equity. I was wondering if someone who is knowledgeable or has worked in the industry can shed some light on the actual activities PE firms do.
Thank you much appreciated
- PrivateBankerLv 78 years agoBest Answer
This link should prove very helpful...(a PE primer)
Additionally, from here:
What Does Private Equity Mean?
Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.
The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.
Investopedia explains Private Equity
The size of the private equity market has grown steadily since the 1970s. Private equity firms will sometimes pool funds together to take very large public companies private. Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO.
Hope this helps...
- 8 years ago
Private Equity = Rich people's money
PE firms manage "rich people's money" and they invest it to make "rich people" even more rich.
The difference between a PE firm and a Hedgefund or a bank, for that matter is that PE firms typically are created to just pool money together to buy companies or merge companies in order to gain control, and sell the assets for a profit or turn the company around from unprofitable to profitable, or other reasons, but all basically in the name of for profits.