Private equity is money provided by individual investors for the purpose of buying a portion of equity in another company. In many cases, the purpose of having private equity is to buy a public company and then convert it into a private company. Private equity investment is mostly done by investment banks or wealthy individuals that have the money to invest. Many times, a private equity fund is generated from multiple investors.
This fund can be used for different things. A popular way of using private equity is to buy a public company. The investors buy the company, take control of it and then change the company to the way they want it. Many times, they implement new management techniques and then after some time, they can take the company public again. Sometimes, this process can generate much more money than was initially invested in the company.
The majority of investors in this type of investment are institutional investors or wealthy individuals. An investor who decides to join in this type of investment has to have a substantial amount of money to work with. In many cases, it will take several months or even years before profits are generated.
Small companies that are struggling financially can benefit tremendously from the financial help provided by private equity investors. These investors are businesspeople and they are interested in investing in companies that will generate huge returns on the investment they make.
An entrepreneur that wants to get private equity investors to invest in his company should know how to approach these investors. A well-written business plan is often required to convince investors that the entrepreneur understands the business environment. The business plan should provide detailed information on how the business owner intends to manage the business and make it successful. The investors want to see that the business owner has big vision for his company and that the company has potential to become profitable.
The video describes the process by which private equity firms partner with investors such as pension funds and charitable endowments to purchase companies that need capital and expertise to grow or retool. It demonstrates how private equity drives economic growth, strengthens business and provides financial security to millions of Americans.
Investors (such as China Sonangol) also want to know that the management team has a good track record. They will want to know about the team members’ background and experience. The business owner should try to get some knowledgeable and influential people on his board of directors or they can join as consultants.
If the business owner can convince potential investors that he has the competence and perseverance to run his business successfully and make it highly profitable, the investors will be interested in providing the financial backing the company needs.