Private equity is a fund which popular investment firms raise from various sources to invest in large companies. Most of these corporate enterprises do not list their shares, debentures, or bonds on any public stock exchange. The objective of the fund managers of the investment firms has restructured the capital of the portfolio companies they acquire. They also act as experts in helping the management improve the organizational efficiency and profitability of their businesses. For the services they provide, the fund managers normally occupy important board positions in these companies.
Tyler Tysdal – What is the difference between private equity and venture capital?
Tyler Tysdal is a management graduate from Harvard University and an expert on private equity funds. He specializes in investment banking, corporate acquisitions, hedge funds, venture capital, and real estate investments. Throughout his illustrious career, he has the distinction of holding many important executive positions on the boards of popular companies. These corporate enterprises include EduNation, Brand Journey Capital, TIVIS Capital, and Mantucket Capital. Currently, he holds the position managing partner in Platte Management. This is a family-owned business specializing in private equity, and real estate investment has made positive impact opportunities to those who have approached him for advice and guidance. He is also the founder of TitleCard Capital, a prominent private equity firm in America.
What are the common examples of private equity investment?
Tyler Tysdal says investment firms collect the money need to invest in large companies from diverse sources. These investors fall under the category of wealthy individuals, pension funds, endowment trusts, foundations, private institutions, and labor unions. These officials of private equity firms make huge investments in the portfolio companies they acquire. As a result, they have a say in the overall functioning of these corporate enterprises. Their objective is to improve the investment value and profit-earning capacity of these businesses over a period of 7 years. Then the officials of portfolio companies can pursue one of the two options. They can proceed to issue an initial public offering or allow fund managers of private equity firms to sell their stakes. The two most common forms of private equity investment strategies are venture capital and leveraged buyouts.
How does private equity differ from venture capital?
This expert explains a venture is a form of private equity. Unfortunately, most people confuse both these forms of investments. Investment firms specializing in venture capital normally focus on investing start-up companies which show good growth potential. These corporate enterprises normally operate in the biotechnology sector. In many cases, the managers of firms also provide technical and managerial assistance to these businesses.
Moreover, they acquire a minority stake in their portfolio companies. This is not the case with investment firms specializing in private equity. These firms prefer to acquire larger public companies which have been operating in the market for a long time. Moreover, the fund managers of these firm opt for a majority stake in their portfolio companies.
Tyler Tysdal clarifies that both private equity and venture capital can help a business improve its growth potential over time. The investment firms in offering these forms of investments have their own criteria for choosing which portfolio companies they wish to invest. Firms specializing in venture capital generally opt for promising start-up companies which have good growth potential. On the other hand, firms offering private equity prefer to choose large public companies for development and expansion.