Private Equity is an attractive field and many people feel fully intrigued to know about what all happens in this fast-paced, lucrative area of work. So, here I am discussing the nitty-gritty of the work carried out by professionals in Private Equity.
I think, it is known to all that private equity is about selling and buying companies but many people feel perplexed over what exactly P.E professionals do on a daily basis. This article shall calm down the curiosity of such people as it throws light on the tasks undertaken by professionals in the P.E business.
This responsibility is mostly borne by the senior partners, however, there are times when this task is assigned to a devoted fundraising team that works within a few larger funds. In point of fact, every three to four years, the senior management approach international investors like pension funds, insurance companies, banks along with high net worth people to help them raise money for the next fund.
So basically, when the present fund is near to being completely spent (that is when seventy to eighty percent of the cash has been invested), the high-level executives go from one place to another in order to persuade people fresh money. The act of Fundraising envelops presenting the last performance that the fund made, its strategy, along with the individuals who work in the firm and are in charge of deciding investments.
Sourcing as well as making investments
The sourcing or finding investments is usually carried out by middle-to-senior management. It involves searching for some potential targets together with getting in touch with to the senior management of those firms, either by a direct route or through a middleman like as an investment bank. Several private equity funds specialize in different sectors or regions and their devoted teams have a very solid knowledge of every attractive company in a particular sector and also have a good understanding of the management teams of the potential targets.
When it comes to the part where they have to acquire a company, that specific responsibility is given to the junior teams which are under the supervision of the seniors. This covers the act of going deep into the company’s financial performance, analyzing industry trends, negotiating with targets, and coordinating with advisors: accountants, investment banks, lawyers, strategy consultants, technical experts and so on. Once they analyze enough information, this team presents an “investment paper” in front of the senior partners for proposing the investment.
After a firm is acquired, it requires to be guided and managed for a few years till it is sold to another party. Though private equity professionals aren’t really a part of the day-to-day functioning of the firms that they buy, they do observe and gauge performance along with being involved in essential strategic decisions. Some companies have a team of specialists that manage the investments and in most cases, the team working on the transactions are in charge of supervising the company.