Private equity is a business in which investors provide capital to existing or startup businesses for an ownership share. Private equity firms offer money to help an existing company grow or take on an individual or business. Besides providing capital to individuals and companies, private equity firms also have many other roles. These roles include providing advice, management consulting, and acting as a catalyst for buyouts. The following article will discuss them in detail:
Bringing New Management Consulting Ideas to Existing Businesses
Private equity firms have a reputation for having business acumen, strong strategic thinking, and goal-setting abilities. They can provide valuable services such as strategic planning, implementing new policies and procedures, restructuring companies, etc. These areas are almost always neglected by companies experiencing bad performance and needing a jump start. Many private equity firms bring new and innovative management consultancy skills to companies that require some guidance.
Investing in Startup Businesses
Private equity firms invest in many different businesses, including technology, professional service, manufacturing, and consumer products industries. They provide capital to companies in these industries because they can assist these businesses in growing and succeeding. Giving these businesses a boost in their development is a key role that many private equity firms play. They work with startup companies to help them boost revenue and increase sales. They usually work with new startups for three to five years before selling or relaunching the businesses they created. In these industries, many private equity firms act as bankers meaning they provide capital to new companies while investing their own money into the company at the same time.
Acquisition of Existing Companies
Private equity firms such as STORY3, which Peter Comisar manages, have a variety of methods they use to purchase existing companies. They may buy one company at a time, purchase multiple companies, or buy the company outright. Buying companies has been a very successful strategy for private equity firms because it allows them to own a large portion of the business and be profitable in the long run. Private equity firms can take over the entire company and alter its policies, procedures, and goals when purchasing businesses. Private equity firms often find this type of acquisition profitable as it allows them to grow faster than if they had purchased an entire company.
Accelerating Business Development and Expansion
Private equity firms can help an existing business expand its reach and increase its revenue by providing funds to purchase new facilities. When the firms invest capital into companies, they can give them capital and expertise. This allows the company to acquire new facilities, which helps them grow and expand its market share.
Partnering with Startup Companies
Private equity firms also partner with startup companies as they look to bring new ideas, management consulting services, and capital into their portfolio companies. The firms will provide sources of money for these startup companies in which they are taking part in the partnership.
Private equity firms all have different roles to play in the modern economy. Some of these roles are very specific, while others are quite general. When examining various types of private equity firms, they will all be able to provide benefits and services that directly benefit their revenue and growth.