How private equity works
Private equity companies manage funds, which typically invest in unlisted companies or real estate. There are several stages in the private equity investment process starting from collecting capital for the fund and ending with returning committed capital and realized returns to fund investors. The private equity industry started to evolve in the Nordic region in the late 1980s, when several private equity houses, including CapMan, were established.
Private equity enables the growth and development of unlisted businesses
How does private equity work?
- Private equity fund managers raise capital from institutional investors to establish private equity funds.
- Private equity funds make equity investments in unlisted businesses.
- The private equity investor will generally take a controlling position in the business in order to foster active ownership.
- In addition to financing, investors provide strategic expertise and support for the company’s management.
- Value creation in the portfolio companies is usually based on growth and improving profitability.
Private equity is a growing form of financing.
Private equity investment phases
Private equity investments are usually categorised based on life cycle phase of the target company:
Seed/early stage investments: Financing for development and commercialization of a business concept.
Venture Capital: Minority/majority investments in early stage or expansion ventures.
Growth Capital: Typically minority investments in companies with major growth potential.
Buyout: Acquisition of a controlling interest in a company together with the operative management or an outside management group.
Special situations: Investments in distressed companies or companies operating in an industry with major changes.
CapMan is mainly active in the growth and Buyout stages.