aquisitions - WS7: Private Equity 1. 2. 3. 4. 5. Explain...

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WS7: Private Equity ___________________________________________________________________________________________________________ _______________________________________Ch 8.2: TRANSFER OF ASSETS _ ____________________________________ _ 1. OVERVIEW Private equity is an investment in the share capital of a private company (ie acquisition) Aims of private equity investors: high rate of return a) to receive income from profits generated by the company (dividends) b) to make a capital gain from the eventual sale of the shares. Quick exit route needed. The risk with private equity is that they are investing in a private co. This is risky as the shares can not be easily sold if the private equity venture fails. But if the venture succeeds then high returns. Traditional private equity : private equity began with the provision of finance to new business. This was by managers seeking to finance the purchase of the business in which they worked (‘buyout’). They put in ‘venture capital’ for a minority stake. Private equity today : Investors will want to take a majority stake in an underperforming co. They hope that investors involvement will turn the co’s fortunes around so it can be sold for a profit when it has returned to its optimum level. a) Management buyout b) Institutional leveraged buyout The private equity provider The private equity fund is the money to be invested in the acquisition The fund may come from a variety of sources (eg individuals/companies/institutional investors) The private equity provider invests the money. The provider makes money by successful investments as he will get fees based on % of profits. The decision to invest The private equity provider will usually have an internal procedure to follow when deciding what to invest in. The decision of what to invest the money in will be based on anticipated rate of return and risks. Types of investments made by private equity provider
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This note was uploaded on 02/23/2012 for the course MGT 101 taught by Professor Staff during the Fall '10 term at Texas State.

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aquisitions - WS7: Private Equity 1. 2. 3. 4. 5. Explain...

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