Private Equity Questions

What People Say

Jay has an impressive ability to locate quality companies in need of equity. We’ve already purchased one of the companies he’s showed us, and we’ll look to him for quality deal flow in the years to come.

Nathan Drake,

Kachi Partners

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Private Equity Firms – An Overview

Private Equity Firms, Our Clients, Are they the Perfect Buyers?

Many of the entrepreneurs that have sold their companies to our clients over the years, have said that their deal represented the best of all worlds: personal liquidity, operating authority, upside potential and maximum valuation.

What is a Private Equity firm?

Private equity firms, sometimes referred to as PE firms, Private Investment Groups, financial sponsors, LBO funds or buyout firms, raise capital from public and private pension funds, insurance companies, wealthy individuals and other institutional investors seeking high returns. They use that capital to purchase or otherwise invest in private or public companies.

Their affect upon today's market for middle-market businesses has been staggering. According to Pitchbook and Thompson Financial, "LBO deals reached $147 billion in 2011. Over the last 10 years, PE firms have raised approximately $1.865 trillion dollars. Even though PE firms own or have made substantial investments in 6,087 at Q2 2012, as of Q2 2012, the PE "capital overhang," the amount PE firms have raised but still have available to invest, stands at a staggering $425 billion. Despite how they are sometimes portrayed in the media, PE firms make their money and are skilled at supporting talented management teams' efforts to increase the value of companies. Although complete purchases are common, a more typical transaction structure involves the financial sponsor buying 80% of the company and then supporting the management team, who retains 20% of the equity with doubling or tripling the size of the business. The management team then sells its appreciated 20% stake for, in some cases, a substantial profit. This is referred to as the "second bite at the apple."