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Published On: Sat, Oct 12th, 2019

Tyler Tysdal: What is Private Equity All About?

The world of investment can be at times difficult to understand and we often get many questions here about different investment vehicles. One of the most common questions which we are asked is about private equity, and investment vehicle which is used to great success. To help us understand what private equity investment is, we spoke to industry expert Tyler Tysdal, fund manager for TitleCard capital who has spent his career in this environment. Let’s take a look that at exactly what private equity is, the benefits it has, and who invests in it. 

pixabay/Mashiro Momo

Private Equity in a Nutshell 

An established business often reaches a point in its life whereby it needs an injection of capital, this could be to save the business, alternatively it could be to seek further growth. A business could seek to borrow from a bank or sell shares to raise capital, but more often than not they are also looking for industry knowledge and guidance with their capital. This is where a private equity investor comes in, to inject the cash and to help the business to survive, or to reach its goals. 

Who Invests?

Private equity groups are a collection of individuals who look to secure investment in  private businesses. There are 10 main private equity firms around the world, companies such as Sycamore Partners and the Blackstone Group. These funds are managed by a small team of fund managers who seek out the best places to invest. 

Where Does The Money Come From?

The money comes from multiple sources, the investors may often put their own money in but generally the money invested comes from pension pots like that of teachers and police, as well as savings accounts from banks and financial organizations. 

Is It A Takeover?

Very rarely will private equity funds look for a 100% takeover of an established firm, but they will look to occupy a board position so that they can have an influence over what the business is doing. In some cases there may be a division of a company which is no longer needed, where a private equity fund will take over this division and run it independently to the rest of the business. 

End Game

Private equity investors are not silent investors, they will put up the money and they will also use their experience in the industry to shape the company which they have invested in. This could be seeking growth by way of new products and development, it could be to restructure the management team in the case of a business which is in trouble. The end game is to eventual sell the share which they have in a company, making a profit, and then paying those profits back to where the source of the money came from. 

Ultimately this is a profitable business deal for all involved which usually benefits the investor, the business and the consumer.

Author: James Daniel

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