What is private equity? According to Greg Lindae, private equity refers to a form of capital which isn’t listed on a public stock exchange. If investors choose to invest directly with a private company, instead of purchasing stocks in a company, their investments are referred to as private equity.
To learn more information about private equity and to discover whether or not you may be interested in investing your hard earned money in a private equity scheme, simply continue reading to everything you need to know about private equity as a possible investment opportunity.
Everything you need to know about private equity?
Most companies who look for private equity from investors look to private equity firms for assistance
Private equity firms exist so that wealthy businesses or individuals are able to invest in a wide variety of companies.
Sometimes private equity firms look to buy out publicaly listed companies
If the owners of a business which is privately listed make the decision to sell their company, they may turn to a private equity firm to buy out their business. In this surprisingly common scenario, the private equity firm in question will pay out all of the businesses shareholders and the company will be quickly removed from the publicaly listed stock exchange. After this point in time, the private equity firm will take sole ownership of the company in question.
In some scenarios, private equity firms reach out to business owners in order to strike a deal
In many scenarios, a private equity firm’s financial advisor’s will identify untapped potential within a company and will actually reach out to a business’ owners to make a competitive offer, which the business’ owners will find extremely hard to turn down.
Those who invest in a private equity firm are referred to as limited partners
The individuals who fund a private equity firm are referred to as limited partners as they may have influence over the company’s which are owned by the private equity firm but have limited say in the day to day running of their private equity firm’s various companies.
In most cases a private equity firm’s investors will appoint a board of directors for each company which the private equity firm takes over, to manage the day to day running of an individual business. However, if the members of a private equity firm are unhappy with a particular company’s profits, they will be able to replace one or more of the company’s board of directors, in order to change the direction in which the company is headed.
Private equity firms don’t always choose to buy out companies directly
In some circumstances, a private equity firm may choose to invest in a company, which isn’t publicaly listed for a minority share of the company. This practice is fairly commonplace and allows the owners of a business to maintain the majority of their company, while being able to invest their investors capital into their business in order to grow their business.
In conclusion, the term private equity simply refers to the practice of individuals or private equity firms choosing to directly invest in a company, instead of opting to purchase shares in a company.