Unlock insights into our firm’s expertise. Discover critical information about our investment strategies, portfolio management, and more. Navigate the private equity world with confidence through our concise and informative FAQ section.
Private equity refers to an investment approach where funds are invested directly into privately held companies or used to acquire control over publicly traded companies, aiming to generate substantial returns. Institutional investors, such as pension funds and wealthy individuals also known as or Limited Partners (LPs), provide capital to private equity firms for investment purposes. Private equity investments involve purchasing a significant ownership stake in a company, often with the goal of actively managing and improving its operations and financial performance. The investment horizon is typically long-term, ranging from three to seven years or more. Private equity investors aim to exit their investments at a higher valuation by selling to another firm, conducting an initial public offering (IPO), or recapitalizing the business. The involvement of private equity firms often includes providing not only financial resources but also strategic guidance and operational expertise to help companies reach their full potential.
Private equity investors are typically institutional investors, including pension funds, endowments, sovereign wealth funds, insurance companies, and high-net-worth individuals that act as Limited Partners (LPs). These investors allocate capital to private equity firms or General Partners (GPs), which act as intermediaries while contributing their own capital to invest in privately held companies. Private equity investors seek to generate attractive risk-adjusted returns by taking equity stakes in businesses and actively managing them. They often have longer investment horizons and tolerate higher risk than traditional asset classes.
Private equity and venture capital are both forms of private investment, but they differ in terms of the stage of the companies they invest in and their investment strategies. Private equity typically focuses on mature companies, often acquiring a controlling stake and implementing operational improvements to maximize value. On the other hand, venture capital targets early-stage or high-growth startups, providing funding and support in exchange for equity. Venture capital investors take on higher risk and aim for substantial returns through rapid growth. While private equity focuses on established companies, venture capital specializes in nurturing young businesses with high growth potential.
Private equity and hedge funds are alternative investment vehicles, but their investment strategies and structures differ. Private equity typically invests in privately held companies to acquire ownership stakes and drive operational improvements for long-term value creation. On the other hand, hedge funds invest in various asset classes, including public equities, bonds, derivatives, and commodities, to generate high returns while managing risk. Hedge funds often employ more active trading strategies and have greater flexibility in their investment approach. Additionally, private equity company typically have a longer investment horizon and lock-up periods, while hedge funds offer more liquidity to investors.
A portfolio company is a company in which a private equity or venture capital firm has invested. It is one of the companies held within the firm’s investment portfolio. The private equity or venture capital firm typically acquires a significant ownership stake in the portfolio company, often a controlling interest, and actively manages and influences its operations. The firm provides the portfolio company capital, strategic guidance, and operational support to enhance its value and drive growth. The portfolio company’s performance and success directly impact the investment portfolio’s overall performance and returns.
Private equity firms employ various methods to find companies for investment. They have dedicated teams and networks that actively source opportunities. These methods include attending industry conferences, networking events, and trade shows to identify potential targets. Additionally, they maintain relationships with investment banks, business brokers, and industry experts who can provide leads. Firms also conduct proprietary research and utilize data analytics to identify companies that fit their investment criteria. They sometimes proactively approach companies or engage in competitive bidding processes. Leveraging their industry knowledge and connections, private equity firms employ a combination of proactive sourcing and passive deal flow to identify potential investment opportunities.
Private equity fund managers are typically compensated through management fees and carried interest. Management fees are an annual percentage of the committed capital that investors contribute to the fund to cover operating expenses. Carried interest, also known as “carry,” is a share of the profits generated by the fund’s investments. It is typically a percentage of the profits above a specific hurdle rate, such as a specified return to investors. The carried interest aligns the fund managers’ interests with the investors and serves as a performance-based incentive, rewarding them when they generate successful investment returns.
Private equity (PE) firms offer several advantages when investing in a company:
Overall, PE firms bring not only capital but also expertise, resources, and strategic guidance to help companies thrive and reach their full potential.
While private equity (PE) investments offer several advantages, there are also potential disadvantages:
It’s important for companies considering PE investment to carefully assess these potential disadvantages and ensure alignment with their long-term goals and values.
A growth equity partner is an investor who provides capital and expertise to fuel the expansion of your business. They typically focus on companies with proven revenue and market traction, aiming to accelerate growth. By partnering with a growth equity firm, you can access additional funding, industry connections, strategic guidance, and operational support to help scale your business and achieve your growth objectives.
Our private equity companyfund focuses on investing in promising consumer companies in Southeast Asia with a product/service customer love but faces operational challenges from rapid expansion. While specific criteria may vary, we typically look for companies with a track record of revenue growth, a scalable business model, and a competitive advantage in their target market.
As a growth equity partner, we aim to work collaboratively with entrepreneurs while respecting the autonomy of the management team. For the first years of the partnership, until there is no strong management team in place and the company is on track to reach the shared mission, you can expect our team to visit your company once a week to advise on whatever challenge you might face. In addition, we can work in parallel on special ad-hoc projects, e.g., a new market entry strategy that might be too daunting on the day-to-day operations.
Our private equity companyfund generally has a medium- to long-term investment horizon, typically from three to seven years. However, the actual investment duration can vary depending on various factors, including the growth trajectory of the company and the market conditions. We aim to align our interests with the entrepreneurs and work together to achieve sustainable long-term growth.
Private equity firms exit a company through various strategies to realize their investment returns. Common exit routes include:
We encourage entrepreneurs seeking a growth equity partner to contact us through our website or the contact information provided. You can submit a brief introduction about your company, including key highlights such as revenue growth, market position, and your growth plans. Our team will carefully review the information and, if there is a potential fit, initiate a confidential discussion to explore the partnership further.