Private Equity is the purchase of a company by an investor. The goal of private Equity is to make money by selling the company later on for more than they paid for it.
Private Equity has been around since at least 1831 and was created to protect vulnerable businesses from public markets. Today, private equity firms have large networks spanning different industries to find potential investments before they become available to the general market.
In this blog post, we will explore what private Equity means and who benefits most from these types of transactions!
Traditional forms of investing can be broken into two main categories, public markets for non-public companies (IPOs) or buying private equity stakes in a company with no intention to sell them until later when they’ve matured or had an opportunity to grow substantially through investment.
There are many benefits for investors who purchase private equity shares instead of stocks because there’s greater potential profit due to the lack of limitations around trading and fewer laws regulating this type of transaction than other types like IPOs.
The downside is that it takes more time before these investments pay off, so you need to be patient.
Private Equity can either refer to the company being invested in, or it can also mean a lending institution that’s providing financing for private companies.
What is the future of Private Equity?
The future of Private Equity is AI investing which is when programs use algorithms and other advanced technologies like machine learning to make investments based on these new methods.
It could take years before this becomes mainstream, but experts predict that, at least by 2020, more than $100 billion will be spent annually using artificial intelligence in financial trading alone!
What are some benefits of Private Equity?
Private equity investments provide greater potential for profit due to the lack of limitations around trading and fewer laws regulating this type of transaction than other types like IPOs.
One benefit to these types of investments is that it’s harder for the public market to get in on your good deals and undercut you because they don’t have access to all the information like a private company does when dealing with an offer, investor, or possible sale price.
One more benefit is that people who invest in those companies often become more involved by holding seats on their boards, so there’s better communication between investors and business owners.
What are some downsides to private Equity?
One downside can be if things go wrong during the acquisition process, then anyone invested loses out through bankruptcy or buyout, which doesn’t happen with traditional IPOs.
There is also a lack of liquidity, meaning it’s more difficult for investors to sell their investment before they would like, so patience and planning must be taken into account.
Unlike public markets, where you have tight restrictions on pricing and options as an investor, there isn’t much regulation when investing in private companies, so those who support need to make sure they’re aware of what risks exist before making these types of investments.
Blackstone Futures is one company that specializes in this area, but there are many others as well.
