Over the last ten years or so, private equity firms have become very important acquirers in a wide variety of industries. There are hundreds of these firms, which in aggregate, have billions of dollars to invest in acquisitions.
Many private equity groups have committed funds, usually ranging from $100 million to over $1 billion. In most cases, this capital has been raised from pension funds, banks, insurance companies, and wealthy individuals. Others do not have committed funds, instead looking to arrange the equity after a deal to acquire a company has been negotiated.
Private equity firms come in a wide variety of specialties. Some are purely early stage investors (i.e., venture capital) while others focus on buyouts of mature companies. Certain groups also specialize in selected industries (e.g., healthcare, technology, biotech), certain situations (e.g., turnarounds, roll-ups, going private) and/or selected geographies.
In addition to differences in industry and stage preferences, private equity firms also have widely divergent approaches to the use of leverage, management equity participation, operational autonomy, and exit strategies. Also, as in most industries, there is a wide variety of business philosophies and reputations.
The keys to working with private equity are understanding the firm's:
- Track record and reputation in the M&A marketplace;
- Valuation methodologies and use of leverage;
- Industry, investment size and stage preferences;
- Exit timing and strategies;
- Role in the ongoing management of the business.
Click here for a partial list of private equity groups active in the U.S. Feel free to browse the links to learn more about each firm.
