RAA Capital is a private investment firm & family office.
Learn more by clicking here.
In its most basic sense, private equity is the direct investment of capital into private companies from private investors. Usually, private equity investors are individuals who have large amounts of capital to invest over a long period of time. From leveraged buyouts to angel investments and venture capital, these investors use private equity to eventually turn a profit on emerging, young, or ailing companies.
Private Equity Investors Pool Capital
For investors, private equity is a way to leverage their investment capital to directly influence a company. In the case of leveraged buyouts, private equity investors use borrowed money to cover a significant portion of the costs to acquire a company. Investors take a majority control of the company, using its assets to raise the acquisition costs through a loan from banks or other investors or by issuing typically low-grade bonds. Private equity investors use leveraged buyouts to encourage company growth or restructuring, without forcing investors to provide a large amount of capital. Investors in private equity that deal with venture capital also aim to fund company growth, though these companies are usually emerging or very young companies. Venture capitalists either have their own capital or pool capital from private investors to invest in these companies. Pooling capital can allow investors of private equity to share a large stake in a company’s future profits and stocks.
Private equity has become popular with both private and corporate investors because of the high return potential. Though the risks of venture capital, angel investments, leveraged buyouts, and other forms of private equity can be considerably high, private equity investors enjoy very large returns if the company succeeds. The number of investors in private equity has increased significantly over the years, meaning there is a higher demand for investment opportunities. Corporations and private investors are also attracted to this type of investment not only for its potential gains, but also for its typically flexible nature. Private equity investments allow investors to hold their investment until the time when their return is highest, which can also allow for long-term investing.
Recent trends show the number of private equity investors will likely rise, not fall. The concept of private equity is attracting new investors interested in leveraged buyouts, venture capital, and angel investing. This means that with a larger base of private equity investors, companies seeking capital may do well to tap into this market to get funding for their business objectives. For example, private companies may need capital to strengthen their balance sheets, fund new products or technologies, expand working capital, or restructure management. These ways of using capital can help grow a business and its profits, and in turn, raise profits for the investors of private equity. Companies can connect with angel investors, venture capitalists, and private equity firms through online services that act as matchmakers between companies and investors or attend networking events.
Investors in private equity may be wary of potential failure, as the risk of a company going bankrupt before earning back its investors’ money is possible. This means private equity investors should fully weigh the risks and rewards to see if an investment can be justified.
A leading mobility solutions company.
Black Gaming, a local market-focused gaming and hospitality company.
American Midstream Partners