A Dialog with You

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Private Equity Groups

Private Equity Groups invest in companies for long term equity growth. They are small groups, two to fifteen principals, whose business is to invest capital in equity.

Each firm has capital that is committed to them. These "funds" range from $50 million to $1 billion. Because these investment professionals have a number of portfolio companies and a limited amount of time, they approach dealing with a management team on a strategic level. They do not operate companies on a day-to-day basis.

Quality of management is a key issue for Private Equity Groups. They recognize they are backing management's business plans. If management needs help with strategy or specific operational issues, they have the background and resources to help.

Growth is another key issue. Equity returns are enhanced significantly by growing the cash flow two to three times the original level. Growth can be achieved by organic growth or by acquiring compatible companies. Each group is interested in management participating in the equity growth as well. It is important that their interests and those of management are aligned.