Home > Investing > What Does Private Equity Marketplace Mean?

What Does Private Equity Marketplace Mean?

February 6, 2012

“Private equity marketplace” can be an intimidating term for those new to investment opportunities or those seeking investment.  We explored what the private equity marketplace is all about.

What is it?

Private equity marketplace is a term to describe all equity within businesses that are not trading on a stock exchange, such as the FTSE or NASDAQ.  When businesses invest in the private equity marketplace they usually raise the funds to do so through an initial merger, sale of parts of their businesses, recapitalization of existing funds or through a public offering.  Firms investing in the private equity marketplace are typically looking to their investment to deliver a return after a period of between three and seven years.  These timescales can fluctuate greatly depending on the viability and current financial performance of the existing business prior to investment.

Who will invest?

There are a number of factors businesses will consider before placing capital into the private equity marketplace.  As a business owner you would need to clearly satisfy any potential investors that they are likely to see a return on their investment within the already noted three to seven year time period.  Among the key factors potential investors will consider are the opportunities for growth and value to be created throughout the business in order to maximize their potential returns.  Critical to this is the ability of the business to generate revenues.  Investors will also want to be sure that a strong management team is in place who can deliver the business plan and clear objectives, as well as there being a smooth exit mechanism in place for when the investors’ funds are returned.  Each of these indicators will help a business owner to gain the trust of potential investors and increase the likelihood of securing any investment from private equity.

Where to look

There are a number of online resources which provide guidance and clear information on which industries private equity firms are looking to invest in and which investors are currently actively seeking opportunities.  Most online databases allow searches by specific criteria such as length of investment, size of business and value of investment required.  This fantastic online resource allows both businesses and those looking to invest themselves to seek private equity firms specific to their business knowledge and interests.

Financial institutions themselves will also regularly advertise their services both to businesses seeking a cash injection as well as individuals and businesses looking to invest themselves.  Investing in the private equity marketplace can be a rewarding option both financially and personally should people and businesses alike find investment opportunities suited to their needs.

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