Private equity is a catchphrase for different forms of investment styles by different companies with the ultimate aim of increasing the values of companies and to resale at high profits. The different styles could be leveraged buy-out, venture capital, growth equity, distressed investment, and mezzanine capital.
What’s it like to have private equity jobs? What does the career in private equity entail? What are the different styles of investment and the private equity jobs available in them?
Laying down the inside out of a career in private equity-
Leveraged buy-out (LBO): A private equity firm hires the services of large and stable companies. The ‘leveraged’ part of the nomenclature is related to the owning of money by the private equity firms in addition to money obtained from different sources such as bank loans. Earlier private equity firms used to have 90% debt to fund investments and now they only use 50% approximately.
Venture capital: Venture capital firms take some stakes in firms at an early stage relatively. Later on, more control is authorized over such firms. When the company’s line of products are established and venture capital firms realize that growth potential can be maximized by their introduction to new customers, clients, and partners- more control is exercised.
Distressed Investments: The asset class which is distressed is called distressed investment. Distressed investments, in turn, are classified into three different categories- distressed debt, turnaround, and special situations.
Distressed debt is the purchase of securities which might be a trouble due to non-performance or is undervalued. Such kinds of an asset are purchased in lieu of rise in the prices of such asset class or to be in the possession of cheap stakes in the companies with such distressed debts.
Turnaround is the procedure related to company control in times of financial difficulties and to push them towards profitability.
Special situations are about an expectation of a windfall in the future possibilities of under-valued companies. The private equity firms look forward to the exploitation of fluctuating market conditions and price inefficiencies for an unexpected turn of events to take in a good amount of moolah.
Mezzanine Capital: Easy money for companies looking at a rise in cash immediately. Mezzanine funds are debt funds are an expansion of companies, generally attached with a lot of strict conditions. Conclusively, due diligence is indispensable. In case the loan is not repaid, the lender is privileged to convert debts into equity stakes or ownership. Usually, it comes with a lot of caution and responsibilities.
Growth Equity: Sitting somewhere between the middle of an advanced stage venture capital firms and leveraged buy-outs is growth equity. Private equity firms usually invest in expansionary companies which are mature, often taking a small stake. If these companies need cash for making an acquisition or for expansion of the capital- growth equity comes into the picture.
Now that you have an idea of private equity, think of the firms with which you would like to have private equity jobs.