Private Equity

Private Equity:

1 Structure of private equity firms

2 Problems of private equity

Private Equity

Private equity is a pooled investment vehicle used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity. Private equity is typically limited partnerships with a fixed term of 10 years (often with annual extensions).

1 Structure of Private Equity Firms

 Limited partnership

 Limited liability Company

^v   Management fee

^v   Publicly traded private equity‘

^v   Private investment in Public Equity

^v   Pledged fund

2 Features of private equity

^v   Equity holders can enjoy the benefits of acquiring majority or minority stakes

^v   Usual duration of stay of private equity holder in a business enterprises varies from 3 to 6 years

^v   It takes around 3 months to complete a usual transactions

7.3Process of private equity financing

^v   Fund formation stage

^v   Investment stage

^v   Management stage

^v   Exit stage

Fund formation stage

Its contain structuring ,raising and formation of new fund. agreement is made in this stage

Investment stage

It includes generation of deal flow, the selection of attractive companies and structuring of transactions

Management stage

The firm monitors the development of its portfolio companies and aims at adding value of the firm

Exit stage

The firm sells successful companies either to the stock market or other investors