Private equity firm: Difference between revisions
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{{Short description|Firm that invests in privately held companies}} |
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{{About|private equity fund managers or financial sponsors|private equity investment funds and an overview of the industry|private equity fund|and|private equity}} |
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[[File:Private Equity Fund Diagram.png|350px|thumb|right|Diagram of the structure of a generic private equity fund]] |
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{{more citations needed|date=November 2022}} |
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A '''private equity firm''' is an investment management company that provides [[financial backing]] and makes investments in the [[private equity]] of startup or operating companies through a variety of loosely affiliated investment strategies including [[leveraged buyout]], [[venture capital]], and [[growth capital]]. |
A '''private equity firm''' is an [[investment management]] company that provides [[financial backing]] and makes investments in the [[private equity]] of [[Startup company|startup]] or operating companies through a variety of loosely affiliated [[investment strategies]] including [[leveraged buyout]], [[venture capital]], and [[growth capital]]. |
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==Definition== |
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Typically, a private equity firm will raise pools of capital, or private equity funds that supply the [[Ownership equity|equity]] contributions for these transactions. Private equity firms will receive a periodic [[management fee]] as well as a share in the profits earned ([[carried interest]]) from each [[private equity fund]] managed. |
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Often described as a [[financial sponsor]], a private equity firm will raise funds, pools of [[Financial capital|capital]], or [[private-equity fund]]s that supply the [[Ownership equity|equity]]. |
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These funds will be invested in accordance with one or more specific investment strategies. |
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==Business model== |
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⚫ | Private equity firms characteristically make longer-hold investments in target industry sectors or specific investment areas where they have expertise. |
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⚫ | Private equity firms, with their investors, will acquire a controlling or substantial minority position in a company and then look to maximize the value of that investment. Strategies include [[leveraged buyout]] ( with borrowed capital), [[venture capital]] (for start ups), and [[growth capital]] (mature companies). |
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Private equity firms generally receive a [[return on investment]] through one of the following avenues: |
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* a periodic [[management fee]] as well as a share in the profits earned ([[carried interest]]) from a private-equity fund managed. |
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==Difference to hedge fund firms== |
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⚫ | Private equity firms characteristically make longer-hold investments in target industry sectors or specific investment areas where they have expertise. Private equity firms and investment funds should not be confused with [[Hedge funds|hedge fund]] firms, which typically make shorter-term investments in securities and other more liquid assets within an industry sector but with less direct influence or control over the operations of a specific company. Where private equity firms take on operational roles to manage risks and achieve growth through long-term investments, hedge funds more frequently act as short-term traders of securities betting on both the up and down sides of a business or of an industry sector's financial health.<ref> |
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==Ranking |
==Ranking== |
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{{Main|List of private-equity firms}} |
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According to |
According to [[Private Equity International]]'s PEI 300 ranking, the [[largest private equity firms]] include [[The Blackstone Group]], [[Kohlberg Kravis Roberts]], [[EQT AB]], [[Thoma Bravo]], [[The Carlyle Group]], [[TPG Capital]], [[Advent International]], [[Hg (equity firm)|Hg]], [[General Atlantic]], [[Warburg Pincus]], [[Silver Lake (investment firm)|Silver Lake]], [[Goldman Sachs|Goldman Sachs Principal Investment Group]] and [[Bain Capital]]. These firms are typically direct investors in companies rather than investors in the private equity asset class, and for the most part the largest private equity investment firms focused primarily on [[leveraged buyout]]s rather than [[venture capital]]. |
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[[Preqin]] ltd (formerly known as Private Equity Intelligence), an independent data provider, provides a ranking of the [[Fund of funds#Private |
[[Preqin]] ltd (formerly known as Private Equity Intelligence), an independent data provider, provides a ranking of the [[Fund of funds#Private-equity funds|25 largest private equity investment managers]]. Among the largest firms in that ranking were [[AlpInvest Partners]], [[Ardian (company)|Ardian]] (formerly AXA Private Equity), [[AIG|AIG Investments]], Goldman Sachs Private Equity Group, and [[Pantheon Ventures]]. |
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Because private equity firms are continuously in the process of raising, investing, and distributing their private equity funds, capital raised can often be the easiest to measure. Other metrics can include the total value of companies purchased by a firm or an estimate of the size of a firm's active portfolio plus capital available for new investments. As with any list that focuses on size, the list does not provide any indication as to relative investment performance of these funds or managers. |
Because private equity firms are continuously in the process of raising, investing, and distributing their private equity funds, capital raised can often be the easiest metric to measure. Other metrics can include the total value of companies purchased by a firm or an estimate of the size of a firm's active portfolio plus capital available for new investments. As with any list that focuses on size, the list referenced above does not provide any indication as to relative investment performance of these funds or managers. |
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==See also== |
==See also== |
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*[[History of private equity and venture capital]] |
*[[History of private equity and venture capital]] |
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*[[Leveraged buyout]] |
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*[[Management buyout]] |
*[[Management buyout]] |
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*[[Private equity]] |
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*[[Private equity fund]] |
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{{reflist}} |
{{reflist}} |
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==Further reading== |
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* "A Dignified Death: Hospices in the U.S. are increasingly run by for-profit providers, and a lack of regulation allows them to deliver abysmal end-of-life care", by the editors, ''[[Scientific American]]'', vol. 330, no. 2 (February 2024), pp. 68–69. "Today [in the U.S.] nearly three quarters of hospice agencies operate on a [[for-profit]] basis. The sector has become so lucrative that in recent years [[private equity firms]] and [[publicly traded corporations]] have been snapping up previously [[nonprofit]] hospices at record rates. This... has had pernicious effects on hospice care in the U.S." (p. 68.) |
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==External links== |
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{{Private equity and venture capital}} |
{{Private equity and venture capital}} |
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{{DEFAULTSORT:Private Equity Firm}} |
{{DEFAULTSORT:Private Equity Firm}} |
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[[Category:Alternative investment management companies]] |
[[Category:Alternative investment management companies]] |
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[[Category:Private equity firms| ]] |
[[Category:Private equity firms| ]] |
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[[lt:Privataus kapitalo bendrovė]] |
Latest revision as of 21:51, 27 June 2024
This article includes a list of general references, but it lacks sufficient corresponding inline citations. (April 2009) |
This article needs additional citations for verification. (November 2022) |
A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital.
Definition
[edit]Often described as a financial sponsor, a private equity firm will raise funds, pools of capital, or private-equity funds that supply the equity.
These funds will be invested in accordance with one or more specific investment strategies.
Business model
[edit]Private equity firms, with their investors, will acquire a controlling or substantial minority position in a company and then look to maximize the value of that investment. Strategies include leveraged buyout ( with borrowed capital), venture capital (for start ups), and growth capital (mature companies).
Private equity firms generally receive a return on investment through one of the following avenues:
- an initial public offering (IPO) — shares of the company are offered to the public, typically providing a partial immediate realization to the financial sponsor as well as a public market into which it can later sell additional shares;
- a periodic management fee as well as a share in the profits earned (carried interest) from a private-equity fund managed.
- a recapitalization — cash is distributed to the shareholders (in this case the financial sponsor) and its private-equity funds either from cash flow generated by the company or through raising debt or other securities to fund the distribution.
- a merger or acquisition — the company is sold for either cash or shares in another company;
Difference to hedge fund firms
[edit]Private equity firms characteristically make longer-hold investments in target industry sectors or specific investment areas where they have expertise. Private equity firms and investment funds should not be confused with hedge fund firms, which typically make shorter-term investments in securities and other more liquid assets within an industry sector but with less direct influence or control over the operations of a specific company. Where private equity firms take on operational roles to manage risks and achieve growth through long-term investments, hedge funds more frequently act as short-term traders of securities betting on both the up and down sides of a business or of an industry sector's financial health.[1]
Ranking
[edit]According to Private Equity International's PEI 300 ranking, the largest private equity firms include The Blackstone Group, Kohlberg Kravis Roberts, EQT AB, Thoma Bravo, The Carlyle Group, TPG Capital, Advent International, Hg, General Atlantic, Warburg Pincus, Silver Lake, Goldman Sachs Principal Investment Group and Bain Capital. These firms are typically direct investors in companies rather than investors in the private equity asset class, and for the most part the largest private equity investment firms focused primarily on leveraged buyouts rather than venture capital.
Preqin ltd (formerly known as Private Equity Intelligence), an independent data provider, provides a ranking of the 25 largest private equity investment managers. Among the largest firms in that ranking were AlpInvest Partners, Ardian (formerly AXA Private Equity), AIG Investments, Goldman Sachs Private Equity Group, and Pantheon Ventures.
Because private equity firms are continuously in the process of raising, investing, and distributing their private equity funds, capital raised can often be the easiest metric to measure. Other metrics can include the total value of companies purchased by a firm or an estimate of the size of a firm's active portfolio plus capital available for new investments. As with any list that focuses on size, the list referenced above does not provide any indication as to relative investment performance of these funds or managers.
See also
[edit]References
[edit]- ^ A primer: Hedge funds, private equity & venture capital, USA Today, August 17, 2007.
Further reading
[edit]- "A Dignified Death: Hospices in the U.S. are increasingly run by for-profit providers, and a lack of regulation allows them to deliver abysmal end-of-life care", by the editors, Scientific American, vol. 330, no. 2 (February 2024), pp. 68–69. "Today [in the U.S.] nearly three quarters of hospice agencies operate on a for-profit basis. The sector has become so lucrative that in recent years private equity firms and publicly traded corporations have been snapping up previously nonprofit hospices at record rates. This... has had pernicious effects on hospice care in the U.S." (p. 68.)
External links
[edit]- Private equity – a guide for pension fund trustees. Pensions Investment Research Consultants for the Trades Union Congress.
- Krüger Andersen, Thomas. Legal Structure of Private Equity Funds. Private Equity and Hedge Funds 2007.
- Prowse, Stephen D. The Economics of the Private Equity Market, Federal Reserve Bank of Dallas, 1998.