Are you an investor or a global manager who is wondering where to invest and get your return at a remarking profit? Private Equity gives you the chance to invest your capital and earn your profit after the duration of three years.
This is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. It’s a source of investment capital for individual and institutions with a purpose of investing and acquiring equity ownership with hopes of getting a higher return.
What it means
The Business owners and global managers can benefit a lot from Private Equity. The main purpose of Private Equity is to help raise funds through alternative means apart from borrowing excessively from banks. The business owner gives out some of their capital to Equity. This can be a useful way of getting huge profit for pursuing growth strategies.
Private Equity brings expertise to some aspect of business activities. The expertise can help a business owner on financial due diligence. The owner can continue looking after their companies and focus on finding more value and improve on emerging and acquisition outcomes.
How it works
There are four basic things that private equity works to earn money. These are
- Raising money from limited partners like retirement funds, wealthy individuals and insurance companies. They also put up some of their capital up to 5% or more to contribute to the fund.
- Source, diligence, and closes deals. When they analyze companies for potential acquisition, they consider about what the company does, it’s financial performance in the recent years, management and the industry of the company. Prospective deals are made into the company through a combination of the partner’s reputation. Once the potential deal has been sourced, the investment team will carry out heavy due diligence to assess the company’s strategy, the industry and market. If the deal looks unpromising, then the deal is closed up.
- Improve operations, tighten management, and cut costs in their portfolio companies. Private Equity provides advice, introduction and support relating to strategy, operation and financial management to their portfolio companies. They highly engage themselves in streamlining and improving the company to earn maximum profit.
- Selling portfolio companies at a substantial profit is the end goal of Private Equity. The sources of value capture at the exit mainly will be the growing revenue during the holding period, paying down debt that was used to fund the transaction and selling the company at a higher cost. This can take up to three to seven years from the initial investment.
How one can invest in it
In Private Equity, capital is made available to private companies and investors. The funds raised can be used to develop new products expand working capital and strengthening the company’s balance sheet. An investor can invest in Private Equity at a minimum cost of $250,000. Their investment is meant for long-term investment, and the investor is given a substantial return of up to 16% per annum. The duration of investment can range from three to ten years.
Private Equity has become an attractive investment firm for wealthy individuals and institutions. The firm has attracted the best and brightest corporate. The professionals at the Private Equity have deployed investment capital, and they have increased the values of their money.