Private Equity 101
Private equity firms gather funds from private investors with the aim of investing in or acquiring private companies. They typically use a combination of their own resources and borrowed money to make these purchases. After acquisition, they attempt to improve the company's performance and profitability before eventually selling it, often via public offerings, to generate a return on investment. They deal in industries such as technology, healthcare, retail, manufacturing, and services.States with the most Private Equity Firms
- NY - TX - CA - IL - FL - MA - CT - CO - PA - GA - PR - MN - MD - OH - DC - TN - NC - NJ - MO -Largest Private Equity Firms in the United States
Source: SEC Filings, July 2023 Top 101-200 PE Firms
Private Equity News
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May 03, 2024 - Asset Management : SVB Financial Group Enters into Definitive Agreement for the Sale of SVB Capital
May 02, 2024 - Southfield Capital : Kelvin Group and Southfield Capital Announce Refrigeration Design and Service's Strategic Acquisition of Dahm's Refrigeration Services
May 02, 2024 - Basalt Infrastructure Partners : EV Charging Company EnviroSpark Secures $50 Million Investment from Basalt Infrastructure Partners
May 02, 2024 - Accel-KKR : Accel-KKR Completes Acquisition of Accertify from American Express
May 02, 2024 - Breck Partners : Breck Partners Completes Acquisition of NPX One
Apr 18, 2024 - Sunstone Partners : Hyde Park Capital Advises Accuhealth on Growth Investment from Sunstone Partners
Apr 18, 2024 - MPE Partners : MPE Partners and Precision Pipeline Announce the Acquisition of SabCon Underground
Apr 17, 2024 - Graycliff Partners : BlackArch Partners Advises Graycliff Partners on the Sale of Ballymore Safety Products to One Equity Partners
Apr 17, 2024 - Integral : Trusaic Introduces OpportunityParity™; Workplace Equity Solution Helps Organizations Promote Fairness in Hiring, Promotion and Retention
Apr 16, 2024 - Stripes : 7-Eleven, Inc. Completes Acquisition of 204 Stripes Stores
Apr 16, 2024 - VE Partners : King Insurance Partners Announces the Acquisition of The Dave Alton Agency in North Carolina
Apr 12, 2024 - Riverside : Heiting & Irwin, Rizio Lipinsky Merge to Form New Firm - Rizio Lipinsky Heiting, PC
Apr 11, 2024 - Longford Capital : QUINN EMANUEL AND LONGFORD CAPITAL TO OFFER LITIGATION FUNDING TO PRIVATE EQUITY CLIENTS
Apr 11, 2024 - Bridgepoint : Risk Management Leader Forward Global and Bridgepoint Development Capital (BDC) Enter Exclusive Equity Negotiations
Apr 11, 2024 - Peak Rock Capital : PEAK ROCK CAPITAL AFFILIATE SIGNS DEFINITIVE AGREEMENT TO ACQUIRE HUFRIEDYGROUP
Limited partners evaluate private equity firms based on several key factors:
1. Track Record: They look at the past performance of the firm in terms of returns generated on their investments. This includes considering the success of previous investments, the effectiveness of their exit strategies, and the overall growth of the firm.2. Experience and Expertise: The experience and knowledge of the firm's team, especially in the industry or sectors they invest in, are examined. This includes the team's skill in business operations, financial engineering, and deal structuring.
3. Investment Strategy: They assess the firm's investment thesis, sector focus, deal sourcing strategy, and value creation plans. This helps determine if the firm's strategy aligns with their own investment objectives.
4. Governance and Transparency: Limited partners prefer firms that have strong corporate governance, clear reporting systems, and high levels of transparency to ensure the security of their investment.
5. Risk Management: They evaluate how the firm manages risk, including its financial leverage, diversification, portfolio company management strategies, and downside scenarios.
6. Fees and Terms: Limited partners assess the fee structure, carried interest, terms of the fund, and other economic considerations. They want to ensure they understand all costs and potential financial implications before committing their capital.
7. Market Reputation: They often consider the firm's reputation in the market, its relationships with key stakeholders, portfolio companies, and the wider business ecosystem.
8. Alignment of Interests: Limited partners look for evidence that the private equity firm's interests are aligned with their own. For instance, they prefer firms where the team commits personal capital into the fund (known as a "skin in the game").
Overall, limited partners perform thorough due diligence before deciding to invest with a particular private equity firm.
Private equity firms evaluate potential investments using a rigorous process that traditionally involves the following steps:
1. Deal Origination/Sourcing: This stage involves identifying potential investment opportunities, often within specific industries or sectors the firm has expertise in.2. Preliminary Analysis: This entails a basic analysis of the company's financials, its market position, and its growth prospects. This helps the firm decide whether to pursue the opportunity further.
3. Due Diligence: If initial reviews are positive, the firm then conducts an in-depth due diligence process. This generally includes a more thorough financial analysis, legal review, market analysis, and operational assessment. External consultants may be involved in this detailed examination.
4. Valuation: The firm will value the business using methods such as discounted cash flow (DCF), multiples from comparable public or private firms, or leveraged buyout (LBO) models to understand potential returns.
5. Deal Structuring: If due diligence and valuation stages affirm the potential of the investment, the firm then structures the deal, taking decisions regarding the mix of debt and equity, the terms of the shareholder's agreement, management incentives etc.
6. Investment: Following successful negotiations, the firm will make the investment, often acquiring a significant or controlling share in the company.
7. Post-acquisition Management: After investment, the PE firm works closely with the company’s management to improve operations, accelerate growth, and ultimately increase the firm's value. This may involve strategic redirection, operational improvement, financial restructuring, or leadership changes.
8. Exit: The final stage of the investment process is the exit, which could be through a sale to another company, a public offering, or a recapitalization. The objective is to sell the company at a higher value than the purchase price to generate a substantial return on investment.
Each investment is unique, so the specifics of this process may vary depending on the private equity firm's strategy and the nature of the potential investment.
Private equity firms evaluate job applicants on a variety of key aspects:
1. Academic Background: Applicants are usually expected to have strong academic backgrounds, typically with degrees in finance, economics, business or similar fields. Top-tier universities and high grades are usually favored.2. Work Experience: Work experience in relevant fields such as investment banking, management consulting, or corporate finance is highly valued. Private equity firms look for experience in financial modeling, deal-making, strategic analysis and due diligence.
3. Technical Skills: Applicants should possess strong financial and analytical skills. This includes competence in financial modeling, understanding of financial statements, valuation techniques, and knowledge of investment strategies.
4. Deal Experience: Having direct experience in deal-making, either in sourcing, due diligence, transaction execution, or portfolio management, is a major advantage.
5. Interpersonal Skills: As PE firms work closely with the management of portfolio companies, they value candidates with strong communication and relationship-building skills.
6. Entrepreneurial Spirit: A willingness to take risks, ability to think creatively and solve problems, and an understanding of how to grow businesses is often sought after by PE firms.
7. Understanding of the Industry: Private equity firms may focus on specific industries, so knowledge or interest in these areas can be beneficial.
8. Team Fit: Candidates should be able to show they can work effectively in the firm's team structure and fit with the firm's culture.
9. Drive and Motivation: Firms want to hire people who are ambitious and driven, who show passion for the work and will strive to succeed.
10. References: Good references can confirm a candidate's experiences and skills, and also afford additional trust in their potential.
Finally, some private equity firms also appreciate applicants who may have done some due diligence on them, understanding the firm’s investment thesis, operating style, and portfolio. Demonstrating this knowledge could be an added advantage.