Private Equity. Critical analysis from the points of view of investors and target companies

Trabajo Escrito , 2013 , 32 Páginas , Calificación: 1,7

Economía de las empresas - Inversiones y finanzas

Private Equity plays an increasingly important role in the financing of a wide range of businesses. Over the past 20 years, private equity has been on of the fastest growing markets for corporate finance. One of the reasons the private equity industry exist is that, in many cases, companies have needs for capital which, for various reasons, cannot be met from the public markets. Investors that provide capital to private equity funds invest in an asset class that entails relatively high-risk and high illiquidity in what remains a largely unregulated market.

Planning how to exit an investment is just as important as preparing to make one because a merger adds value only if synergy, better management, or other changes make the two firms worth more together than apart. The target companies are supported with accountants, lawyers, investment bankers and other specialists. Especially Start-up companies are often characterised by negative cash flows and demand high investments. PE gives the chance to reduce the financial gap between selffinancing and stock exchange listing and can also help to improve the equity ratio. Another advantage of PE for target companies is the increase of equity and an improved balance sheet structure.

Regarding to that, the negotiating position is strengthened towards creditors, the credit rating is improved and the financial room for investments increases. The main disadvantage of PE for target companies is the weakened influence of the initial shareholders. Especially different strategically views between those two groups might be difficult to solve. Due to the fact of the high risk, from the investors’ perspective, PE is a very interesting form of investment. Especially under diversification aspects the investment in PE funds make sense, because the investors offer investment opportunities that can not be replicated in the financial market and on top of that have a low correlation with other asset class.

The firms standard practice of buying businesses and then, after steering them through a transition of rapid performance improvement and selling them is at the core of private equity’s success.

Inhaltsverzeichnis (Table of Contents)

• Executive Summary
• Table of Contents
• List of Abbreviations
• List of Figures
• 1 Introduction
• 1.1 Objective
• 1.2 Methodology
• 2 Private Equity
• 2.1 Definition
• 2.2 Private Equity in Germany
• 3 Perspective of Target Companies
• 3.1 Advantages
• 3.2 Disadvantages
• 4 Perspective of PE investors'
• 4.1 Why to invest...
• 4.2 Exit Strategies
• 4.2.1 IPO
• 4.2.2 Trade Sale
• 4.2.3 Secondary Sales
• 4.2.4 Buy-back
• 4.2.5 Recapitalisation
• 5 Conclusion

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper examines the role of private equity in financing businesses, analyzing the perspectives of both investors and target companies. It explores the advantages and disadvantages of private equity investments for both parties, examining the exit strategies employed by investors and the impact of private equity on the target companies' financial structure and control.

• The role of private equity in financing businesses
• Advantages and disadvantages of private equity for investors and target companies
• Exit strategies employed by private equity investors
• The impact of private equity on the financial structure and control of target companies
• Private equity in the context of the German market

Zusammenfassung der Kapitel (Chapter Summaries)

The paper begins with an introduction outlining the objective and methodology of the study. Chapter 2 delves into the definition of private equity and its significance in the German market. Chapter 3 explores the advantages and disadvantages of private equity for target companies, considering the impact on financial structure and control. Chapter 4 examines the motivations behind private equity investments and analyzes various exit strategies employed by investors. The conclusion summarizes the key findings and insights of the study.

Schlüsselwörter (Keywords)

Private equity, investment, financing, target companies, investors, exit strategies, IPO, trade sale, secondary sales, buy-back, recapitalisation, financial structure, control, German market.

• Universidad: University of applied sciences, Cologne
• Curso: International Investment & Controlling
• Calificación: 1,7
• Autor: Henning Wenzel (Autor)
• Año de publicación: 2013
• Páginas: 32
• No. de catálogo: V315513
• ISBN (Ebook): 9783668156005
• ISBN (Libro): 9783668156012
• Idioma: Inglés
• Etiqueta: Private Equity, financing, illiquidity