What Is Private Equity Winston Rowe & Associates

Private equity investors invest in non-public companies and typically hold their investments with the intent of realizing a return within 3 to 7 years. 248-246-2243
 
 
Spread the Word
Listed Under

Tags:
* Private Equity
* Business
* Finance

Industrys:
* Finance
* Business

Location:
* St. Clair Shores - Michigan - US

June 14, 2012 - PRLog -- What Is Private Equity Winston Rowe & Associates 248-246-2243

Winston Rowe & Associates, a no advance fee international commercial business financial advisory firm. They have developed this article to assist their prospective clients with the fundamentals of Private Equity.

For additional information concerning Winston Rowe & Associates financing solutions, they can be contacted at 248-246-2243 or visit them on line at http://www.winstonrowe.com

Overview:

Private equity investors (also called financial sponsors or buy-out firms) invest in non-public companies and typically hold their investments with the intent of realizing a return within 3 to 7 years. Generally, investments are realized through an initial public offering, sale, merger or recapitalization.

While venture capital firms tend to invest in earlier stage growth companies, private equity groups tend to focus on more mature businesses, often contributing both equity and debt (or some hybrid) to the transaction.

What Private Equity Firms Look For:

Strong management team.
Ability to generate cash.
Significant growth potential.
Ability to create value.
A clearly defined exit strategy.

The Value Proposition:

While private equity firms employ various strategies to create value in their investments (such as the consolidation of a fragmented industry), a common strategy is to acquire a "platform" company and grow the platform through further "add-on" acquisitions. Add-on acquisitions are typically smaller in size, but complementary to, the platform investment. Ideally, the synergies of the combined entity create a more efficient whole, both operationally and financially.

Leverage & Cash Flow:

Private equity groups typically use leverage (debt) to increase the return on the firm's invested capital. The amount of leverage employed is normally determined by the target's ability to service the debt with cash generated through operations. vvldt

The ability to generate cash allows the private equity investor to contribute more debt to the transaction. Because of the aggressive use of leverage, often, the cash flow a business generates in the early years following the acquisition is almost entirely consumed by the debt service. Furthermore, if the strategy is to grow the business, and it usually is, growth also consumes cash. For this reason, private equity investors are keenly focused on the cash flow of the business.

Because cash flow is the basis for valuation, the ability to improve operations to generate increased cash flow will also yield a greater return on investment upon exit.

Exit Strategy:

Private equity groups make money from both the cash flow of the acquired business and from the proceeds generated upon exiting the business. The exit provides the investor a mechanism to monetize the firm's equity. This is also referred to as "a liquidity event". The exit provides the financial sponsor with a finalization of the investment and an opportunity to distribute profits. In fact, a significant component of a private equity professional's compensation is based on this profit distribution, called "carried interest", or just "carry". Profits upon exit go to back into the cash account to fund new acquisitions.

Winston Rowe & Associates has an excellent knowledge based investor resource for commercial real estate valuation and market analysis located at:

http://www.winstonrowe.com/Free_Real_Estate_Resources.html

Winston Rowe & Associates has a core focus on building long-term relationships, delivering exceptional and individualized customer service, and positioning loan products that best achieve their client’s goals.

Winston Rowe & Associates
31408 Harper Ave
Suite 147
Saint Clair Shores MI 48082
248-246-2243

Winston Rowe & Associates has no upfront free commercial loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,   Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming
End
Source:Staff Writer
Email:***@winstonrowe.com Email Verified
Phone:248-246-2243
Zip:48082
Tags:Private Equity, Business, Finance
Industry:Finance, Business
Location:St. Clair Shores - Michigan - United States
Account Email Address Verified     Account Phone Number Verified     Disclaimer     Report Abuse
Winston Rowe & Associates No Upfront Fee Lenders News
Trending
Daily News
Weekly News



Like PRLog?
9K2K1K
Click to Share