Private Equity
Process
Investment funds that acquire equity stakes in private companies, typically seeking value creation and exit within 3-7 years.
Full Definition
Private Equity (PE) refers to investment funds that raise capital from institutional investors and high-net-worth individuals to acquire equity stakes in private companies, with the goal of generating returns through operational improvements, growth, and eventual exit.
PE investment strategies:
- Buyout: Acquiring controlling stakes in established businesses
- Growth equity: Minority investments in high-growth companies
- Venture capital: Early-stage startup investments
- Distressed: Investing in troubled companies
Typical PE deal characteristics:
- Leveraged capital structure (debt + equity)
- Active ownership and board involvement
- Operational improvement focus
- 3-7 year investment horizon
- Exit via trade sale, IPO, or secondary buyout
UK PE market:
- One of largest PE markets globally
- Strong mid-market activity
- BVCA as industry body
- Significant dry powder available
- ESG increasingly important
Working with PE buyers: Advantages:
- Professional transaction process
- Access to growth capital
- Operational expertise
- Clear value creation plan
Considerations:
- Governance requirements
- Exit pressure and timeline
- Debt service obligations
- Management incentive alignment