Glossary - Private Equity
Private equity refers to investment funds, generally organized as limited partnerships, that buy and restructure companies not listed on a public exchange. Private equity is a source of investment capital from high-net-worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. Investors seek to generate a return through various strategies, including improving the performance of the portfolio company, as well as selling them for a profit.
Also known as
- PE
- Private Capital
- Buyout Capital
Use cases examples
- Limited Partnership Agreement: The Limited Partnership Agreement details the investment terms, management fees, and distribution waterfall provisions for the private equity fund.
- Investment Memorandum: The Investment Memorandum provides potential investors with information about the private equity fund's strategy, target industries, projected returns, and the background of its management team.
Considerations for investors
- Conduct thorough due diligence on the target company's financial health, market position, and growth potential.
- Assess the management team's capability to execute the business plan and drive value creation.
Considerations for founders
- Understand the implications of equity dilution and control when accepting private equity investments.
- Ensure alignment of vision and strategy with the private equity firm to support growth initiatives.
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