Private Equity

Private Equity refers to the equity capital that is not quoted or traded publicly on a stock exchange. Thus, investors either directly invest funds in private companies or conduct buyouts of public companies leading to de-listing of their securities. This is usually carried out by individuals and institutions of high net worth in order to gain major or complete control over a company in hopes of earning high return. Since these private investors have direct incentive of earning profits from these companies they work actively to produce favorable results and improve the prospects of the company. A private equity investor becomes a part of the company and usually holds a position in the board. Private equity can help companies get the attention they require to grow and to build better businesses as investors have direct stake in the success of the company.

In the last decade, we have seen a huge rise in private equity as it satisfies the need for large cash inflows and doesn’t require compliance with the increasing number of regulations of the stock market. Financial institutions like commercial banks and investment banking firms have also benefited greatly from the rise in private equity. They provide loans to private investors to finance large buy outs. The largest investment banking entities such as Goldman Sachs, J P Morgan Chase etc. have been actively ensuring that they are in the middle of the billion dollar deals being made in this field.

However, the recent recession trends in the economy in major parts of the world have discouraged investors to take huge risks. While the potential returns are great, private equity comes attached with even greater risks. Despite this fact, private equity has been on a rise and record of the most expensive buyout has been broken and re-broken several times.

Click here for government certification in Accounting, Banking & Finance