All Posts in "private equity fund structure"

Types of Private Equity Investments

There are several different types of private equity investments. These include Mezzanine financing, Leveraged buyouts, and Private equity real estate. Depending on your needs, there may be one or more types of private equity for your business. Read on to learn more. Listed below are a few examples of each type of private equity. They may not be right for your business, but they can help you navigate through the financing process.

Mezzanine financing

Mezzanine financing is the process of raising additional capital for a small business that needs more funding than it has in hand. The loan is generally subordinate to other types of debt. If the company goes bankrupt, its senior creditors will recoup their losses first. Then, the mezzanine lender will walk away as a failed opportunity. However, mezzanine lenders have certain advantages over other types of financing.

The typical structure of mezzanine financing involves unsecured subordinated debt with a “kicker” of equity in the form of warrants for common stock. Unlike venture capital, mezzanine loans typically do not require any equity from the borrowers, which makes them a good choice for many smaller businesses. Most mezzanine loans are also conditional on a bank loan, and the percentage of equity that the owners surrendered will be minimal – typically between 5 percent and 15%.

Mezzanine financing has a long history in the US. In the 1980s, savings and loan companies dominated the US debt market. But in the 1990s, hedge funds, boutique banks, and private equity firms … READ MORE ...

Ronnie Jackson by — July 6, 2022 in Private Equity
Types of Private Equity Example

A private equity investment is often a form of venture capital. This implies that the private equity investors will not be the company’s shareholders. As an alternative, they serve as advisors. These investors may offer management expertise and capital to portfolio corporations. Normally, private equity funds appear for providers that have an important potential for development. For example, they may require to enhance capital expenditure to attain a brand new buyer base or rethink their distribution tactic. Furthermore, fund managers may perhaps also guide an enterprise toward larger distribution networks and much more skilled management.

The Private Equity Investment Business’ Eras

The private equity investment business is divided into two distinct eras: the pre-2008 era well as the post-2008 era. The pre-2008 period was characterized by historically low-interest rates, favorable credit markets, and big amounts of debt financing. Consequently, there have been many massive buyouts, such as Toys “R” Us, Hertz Corporation, and Power Future Holdings, all valued at more than $44 billion. In contrast, the 2007-2008 era saw the largest LBOs in history, such as Hilton Hotels, Harrah’s Entertainment, and Hertz Corporation.

Private Equity is not for Everyone

Whilst private equity isn’t for everyone, it is an easy strategy to make larger returns than standard investing. Before investing inside a private equity fund, it truly is crucial to investigate the fund completely. Find out just how much it charges and what it is carried out in the past. Bear in mind that unregulated funds are usually not necessary to … READ MORE ...

Ronnie Jackson by — December 2, 2021 in Private Equity