Friday May 12

What is Private Equity?

Within B&R Beurs, investment groups take small equity positions in companies. Private Equity funds on the other hand acquire whole companies. These funds either acquire publicly listed companies and take them private or acquire private companies. In the past, companies such as Bol.com, Refresco Gerber and Bols were owned by Private Equity funds. Private Equity funds provide capital, expertise to enhance the business and access to an extensive network to accelerate growth. Private Equity funds tend to use leverage (debt) to finance their acquisitions and boost returns.

There are several kinds of investment strategies for Private Equity. First of all there is venture capital, these funds focus on early stage high growth companies. Investment examples would include well-known names such as Spotify and Uber. The second kind of investment strategy is growth capital, companies in this category are typically generating a significant revenue. These companies tend to need capital to accelerate growth and are also looking for expertise to accelerate their performance. The third strategy is Private Equity, which is most famous for leveraged buyouts (LBOs). These buyout funds acquire established companies with stable cash flows, strong market position and low level of capital intensity. These investments tend to have a relative high leverage.