Private capital

Introduction

Private equity is medium- and long-term financing that is provided in exchange for a stake in the share capital of unlisted companies with high growth potential. Private equity is not new, it has been around in various forms for nearly 25 years, including Kohlberg Kravis Roberts (KKR)’s hostile takeover of RJR Nabisco a la barbarians at the door in 1989. Private equity is booming , with buyout companies poised to raise more than the previous record of $215 billion, set in 2006. PE is a broad term that commonly refers to any type of non-public proprietary equity securities that are not listed on a public stock exchange. . PE is very much a “people” business and the investment professionals involved and their interaction as a team will be key in determining the fund’s performance. Capital is typically accessed by companies that do not have the operating history or track record to access lower-cost capital alternatives, but do need capital to grow or expand. This equity is not a silver bullet or a dark force.

Buys

The buying houses are violating the public markets. Buying groups are like the old conglomerates. Acquisitions have generated a growing share of private equity investments by value, increasing their share of investments from one-fifth to more than two-thirds between 2000 and 2005. Real estate and buyout funds have performed strongly in in recent years compared to other asset classes such as public equities, certainly a factor in the excellent fundraising both have enjoyed of late. The bought people who were king of the hill and masters of the universe were suddenly seen as normal people.

European

European VC is showing a steady increase in the number of successful VC-backed companies and notable exits. European private equity fundraising has crossed the 100 billion threshold to reach 112 billion in 2006 alone, a level similar to new capital raised through IPOs on European stock exchanges in the same period. European private equity and venture capital provide a vital source of funding for growing companies in all industry sectors. Funds focused on Europe account for 26% of the global total, while funds focused on Asia and the Rest of the World account for the remaining 11%.

black stone

Blackstone went public on June 22; its initial public offering, the largest since 2002, raised $4. Blackstone’s performance has even been worse than that of Fortress Investment Group, a private equity and hedge fund manager that went public in February. Blackstone is the world’s largest private equity company. Blackstone’s real estate holdings have done even better, up 29% annually since 1991. Blackstone set a record in 2006 by completing $101 billion in acquisitions amid record levels of fundraising and business activity in the US Blackstone , like many other private equity firms, has made much of its money in the buyout business: acquiring undervalued public companies using borrowed money, divesting them, upgrading them, and reselling them at a profit. BLACKSTONE’S RECENT $39 BILLION acquisition of Equity Office Properties Trust demonstrated that few transactions are too big for this new generation of investors.

investors

Investors in private equity funds include wealthy individuals, insurance companies, university endowments, and pension funds.

Conclusion

PE is responsible for 1 out of every 5 dollars spent. Private equity is an investment asset class that describes private investments in private (as opposed to publicly traded) companies. Equities are a preferred asset class for professional managers because they have historically produced superior returns. PE is interested in the long-term performance of the company.