How does the private equity business work
This is how the private equity business works
"See us as consultants," says Max-Burger Calderon, partner at Apax, explaining the private equity model to potential clients: "Instead of a fee, we get the right to invest. And that's not exactly cheap." To put it more soberly: Investment companies provide non-listed companies with equity that they usually have previously collected from pension funds and wealthy private individuals. Some of them are also financed through so-called mezzanine funds from investment banks. For example, Goldman Sachs recently launched the largest fund of its kind to date, worth $ 2.7 billion.
The size of the funds with which the private equity companies go on a shopping spree is between two and five billion euros in Europe. The size of the individual investments is extremely different: While some investment companies also invest smaller double-digit million amounts in family businesses, others specialize in "jumbos" from one billion euros.
The aim of the holding companies is always the same: the value of the company bought up should be increased and the respective company should then be sold again - usually after three to eight years. The way to this goal is mostly similar: The private equity investors aim to increase the cash flow (free inflow of funds) in order to reduce possibly existing debts.
While the takeover of mostly ailing companies ("turnaround investment") was originally the focus of financial investors, at the turn of the millennium the allocation of venture capital for start-ups was particularly popular in the New Economy. After the Internet bubble burst, private equity companies have increasingly specialized in what is known as the growth financing of existing companies.
Another change: While financial investors used to often change board members, strong management is now often one of the basic requirements for entry. In contrast to strategic investors, according to Apax partner Burger, the investment company only makes one decision, namely: "Who runs the company? The management controls the process." But only up to a point. "If things go wrong, we're deep inside," says Heiner Rutt from the Carlyle Group. "They are not known as softies," says Teneovis boss David Winn of his parent company KKR. "You are tough, but fair." In some cases also because the private equity firms often participate in management buyouts and the managing directors can also have a say as shareholders.
- Can a gas gun kill someone?
- Can an economy survive without export
- How does a pretzel feel?
- Increases collagen levels in bone broth
- Are there other sites like Fiverr
- What is the dimension of the point
- What's the coolest type of pendulum
- What are ingenious ways to hide things
- How is Costco different from other retailers?
- Why did Justinian rebuild the Roman Empire?
- What is a customer journey
- Where is new money going?
- Why do we live a life
- Ask Satan for something in return
- YouTube is still written in PHP
- When do I leave social media
- What are some good personal finance blogs
- How easy is it to grow watermelon
- What's after a quarter of meth
- Why do so many people hate patriotism
- Should I take an AP course online?
- What exactly is a chi-square distribution
- What reduces cardiovascular disease
- What's the point of the fat shame