Private equity firm

From Wikipedia, the free encyclopedia

A private equity firm is an investment manager that makes investments in operating companies through a variety of loosely affiliated investment strategies generally called private equity. Often described as a financial sponsor, each firm will raise funds that will be invested in accordance with one or more specific investment strategies (e.g., leveraged buyout, growth capital, venture capital, mezzanine capital).

Typically, a private equity firm will raise pools of capital, or private equity funds that supply the equity contributions for these transactions. Private equity firms will receive a periodic management fee as well as a share in the profits earned (carried interest) from each private equity fund managed.

Private equity firms, with their investors, will acquire a controlling or substantial minority position in a company and then look to maximize the value of that investment. Private equity firms generally receive a return on their investments through one of the following avenues:

• an Initial Public Offering (IPO) - shares of the company are offered to the public, typically providing an partial immediate realization to the financial sponsor as well as a public market into which it can later sell additional shares;
• a merger or acquisition - the company is sold for either cash or shares in another company;
• a Recapitalization - cash is distributed to the shareholders (in this case the financial sponsor and its private equity funds either from cash flow generated by the company or through raising debt or other securities to fund the distribution.

[edit] Ranking private equity firms

According to an updated 2008 ranking created by industry magazine Private Equity International^[1] (published by PEI Media called the PEI 50), the largest private equity firm in the world today is The Carlyle Group, based on the amount of private equity direct-investment capital raised over a five-year window. As ranked in this article, the largest 10 private equity firms in the world are:

1. The Carlyle Group
2. Goldman Sachs Principal Investment Area
3. TPG
4. Kohlberg Kravis Roberts
5. CVC Capital Partners
6. Apollo Management
7. Bain Capital
8. Permira
9. Apax Partners
10. The Blackstone Group

The full list is located here.

Because private equity firms are continuously in the process of raising, investing and distributing their private equity funds, capital raised can often be the easiest to measure. Other metrics can include the total value of companies purchased by a firm or an estimate of the size of a firm's active portfolio plus capital available for new investments. As with any list that focuses on size, the list does not provide any indication as to relative investment performance of these funds or managers.

[edit] See Also

• Private equity
• Private equity fund
• List of private equity firms
• Leveraged buyout
• Management buyout
• History of private equity and venture capital

v • d • e Topics on Private Equity and Venture Capital Basic Investment Types Buyout  • Venture  • Growth  • Mezzanine  • Secondaries History History of private equity and venture capital Terms & Concepts Buyout Financial sponsor  • Management buyout  • Divisional buyout  • Private Investment in Public Equity (PIPE) Venture Seed money  • Startup company  • Angel capital  • Angel investor  • Venture capital financing  • Pre-money valuation  • Post-money valuation  • Venture round Structure Private equity firms and funds  • Limited partnership  • Limited liability company • Carried interest Investors Institutional Investors  • Pension funds  • Insurance Companies  • Endowments  • Fund of funds Related financial terms Initial Public Offering (IPO)  • Mergers and Acquisitions  • Leverage  • High Yield Debt  • Capital structure Lists Private Equity and Venture Capital Investors  • Private equity firms  • Venture capital firms List of finance topics