Private Equity Investor

Private Equity Investors are large funds managed by investment professionals who specialize in acquiring and scaling companies to generate returns for their investors.  Private equity investors have become the dominant private capital market for business owners seeking to expand or exit their businesses.  The preferred transaction type for a private equity investor is called an industry roll-up wherein a platform company is acquired, and then smaller companies are acquired and integrated into this platform.  Private equity investors started out in the early 80’s as transaction specialists who could arbitrage private market and public market valuations.  They expanded to become large multi-billion-dollar funds though initiating various investment strategies.  In today’s middle market, they are an important liquidity conduit for exiting founders wishing to monetize the value of their equity in a sell-side transaction.  Private equity investors develop industry ideas based on their empirical research and discussions with industry experts.  They then mobilize their value creation formula consisting of equity investment, human capital application and deal making skill to create a large business through serial acquisition.  This occurs over a 3-to-5-year time frame where a new management team is brought in to manage the growth.  The private equity investor exits after 3 to 5 years through a sale to another private equity investor or a strategic acquirer thereby generating a large return due to growth premium and differentiated value.