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Private Equity

Private equity is an umbrella term for investments in non-publicly traded companies in various stages of development. Private equity investments can occur as venture capital, mezzanine financing (e.g., convertible loans or silent partnerships) or even leveraged buyouts. Unlike with borrowed capital financing, private equity investments are not typically secured and the investment firm must take on all business risk.
The investor acts as a temporary partner who attempts to earn an appropriate rate of return in exchange for his commitment and participates in the company`s value growth. He therefore supports the firm in achieving its goals by providing guidance and access to its networks. The selling price depends primarily on the success of the company. The investor thus seeks to cooperate closely with management.
The need for private equity can arise in the life cycle of a company for various reasons. A distinction is made between start-up financing, growth financing, acquisition financing, turnaround financing and financing as part of a change in owners. Private equity investors offer the possibility for raising the necessary equity. Various types of investors cover the private equity segment: private equity funds, listed or private investment companies, direct investments by family offices or private individuals.