Manchester Private Equity Group

What is Private Equity?
Private equity is a source of funding that is used to assist the development of unquoted companies. Whereas most investments are often referred to as ‘private equity’, there are two distinct aspects to the asset class: venture capital and private equity.

Venture capital generally refers to seed, start-up or early-stage investments. As the name suggests, it is a type of venture alongside a relatively new business, with a high degree of risk involved.

Private equity investments are generally later-stage commitments, development capital investments and management buyouts. Examples include where a growing business requires investment to expand further, where an external management team are looking to buy into a business, where a struggling company needs a capital injection to put it on a surer footing, and where an existing management team is looking to buy the business from its current owner or parent company.

Accessing private equity is very different from raising bank debt, where lenders have a legal right to interest on the loan and require repayment of the capital, irrespective of whether the business succeeds or fails. Private equity is invested in return for an equity stake in a company and, as shareholders, it is in the interests of the private equity investor to work with the company to help it grow and increase profitability in order to generate returns.

Private Equity came to prominence in the late 1970s and became widely used in the 1980s, and today is a well established asset class. Today, in the UK alone there are more than 250 venture capital and private equity houses, investing several billions of pounds each year.

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The Private Equity Cycle
Investment
Other types of funding
Exit