Private Equity Capital

It is the form of capital that buys majority stakes in companies as part of a sell side transaction. Private equity capital is the dominant form of private capital and is the primary way that businesses change ownership from a founder.  Private equity capital funds are multi-billion funds managed by investment professionals and industry veterans who seek to buy and grow companies to increase their value.  The investments are held for three to five years with an exit occurring via a private sale, a recapitalization or an IPO.  The private equity capital market has grown significantly over the past 25 years and has become a driving force for business efficiency and product innovation in the US economy.    Investments are targeted that align with each fund’s growth strategies, initially through investment in a platform company.  The private equity capital investor then conducts a roll-up of other smaller companies complementary to the platform to increase the revenue and EBITDA of the company.   Private equity capital investing returns were historically achieved through financial engineering. However, the industry has become more growth and innovation oriented, leading to generation of returns from greater scale, diversification and specialization.  Private equity capital is the largest market for founder ownership transfer in the United States.  In addition to ownership investment, private equity capital also invests in companies on a minority basis.  This branch of private equity capital is referred to growth equity investing for fast growing middle market companies.  Private equity capital funds have investment acumen as well as business building and operational expertise.  There is a structured operating approach that emphasizes systems, financial reporting and best operational practices to improve all fundamental facets of the company.