Private Equity Funds
A Private Equity fund is a money which is not in a public exchange. Private equity is composed of 2 factors that are funds and investors who straight forwardly invest in private companies or involved in buying public companies and resultant in the delisting of public equity. The private institutes and retail investors are the people who provide the capital for private equity and this capital is used as a fund for new technology, to make acquisitions.
BREAKING DOWN ‘Private equity’
Institutional Investors and accredited investors are the primary resources of private equity who can invest money for lengthy time periods. To manage private equity event such as IPO’s or to sell a public company long time period is required in private equity investments. Since 1970, private equity market became strong, sometimes private equity firms provide funds in order to privatize extra-large companies. Leveraged buyouts (LBO’s) are actually an action which is performed by private equity firms. Via these LBO’s big amount purchases can be done by a large amount of money. After this type of transactions private equity firms tries to improve the aspects like profit, overall performance of the company with the aim to resale the company to a different firm
Importance to Investors
Basically, a Private equity firm invests in portfolio companies. LP’s are the main fund source of Portfolio Company’s investment and some part of their investment is via debt. Debt-financing is a major part of private equity investment transactions and the money flow which is provided by Portfolio Company is a big source of payment of such financial debt. Private Equity funds play a big role in middle market business. Finance for most of the LBO’s come from the commercial banks and from other financial institutions, such funds like hedge funds and mezzanine funds is also a cause for financing. Since in the mid of 2007, debt financing becomes more complex to get private equity funds than in past years, LBO fund can be attained by most of the equity assets or interests of the portfolio company.