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Key Elements Of A Private Equity Strategy
by Akansha Sharma Content WriterHave you ever heard of terms like middle market buyout, seed capital, mezzanine, real state funds, funds of funds, infrastructure funds, mega buyouts etc,? Well, these are basically different types of private equity strategies that are used nowadays. Deciding as to which strategy will earn you the maximum benefit is often a confusing task. If you are a one planning to invest in private equity, it is advised that you analyse different options well in advance and then choose a one which will be best for you.
In private equity, different types of investments are made in publicly listed (that will change in to private due to the investment) or private companies. It is important to have knowledge about various components of a private equity firm strategy. These components are either geography targeted, company targeted, or depend on the investment sector or value added by the firm. Listed below are the key elements of a private equity strategy:
Stage of Investment: first and the most important element is the stage of investment. It is the basic criteria of classifying private equity firms and strategies. For all companies that are in their early stage or pre IPO stage, venture capital is used for making investments. Next in the picture come growth equity investments, which are generally made in companies that are in business for quite some time. It includes companies that have proved their concepts and products in the market. Unlike early stage companies, these companies are able to generate significant revenues but are looking for further growth. Next stage of investment is the distressed or buyout investments. These investments are made in companies which are mature but not growing very quickly. They have adequate cash flow and want to focus more on capital structuring rather than improving the operations.
Second element of private equity strategy is funds target geography. Funds can target a particular country like PE funds in India, China etc. They can also focus on a particular region like Middle East, north America, North Africa etc.
Third element is the target sectors: Private equity investments can also be divided on the basis of industry sectors they target. Nowadays, these investments are made in various sectors including real estate sector in India, healthcare, technology, media, retail, energy, consumer products, financial services etc. Funds either target one particular sector or two-three sectors, referred as sector agnostic funds.
These are the three basic elements of private equity strategy that are taken into consideration.
In private equity, different types of investments are made in publicly listed (that will change in to private due to the investment) or private companies. It is important to have knowledge about various components of a private equity firm strategy. These components are either geography targeted, company targeted, or depend on the investment sector or value added by the firm. Listed below are the key elements of a private equity strategy:
Stage of Investment: first and the most important element is the stage of investment. It is the basic criteria of classifying private equity firms and strategies. For all companies that are in their early stage or pre IPO stage, venture capital is used for making investments. Next in the picture come growth equity investments, which are generally made in companies that are in business for quite some time. It includes companies that have proved their concepts and products in the market. Unlike early stage companies, these companies are able to generate significant revenues but are looking for further growth. Next stage of investment is the distressed or buyout investments. These investments are made in companies which are mature but not growing very quickly. They have adequate cash flow and want to focus more on capital structuring rather than improving the operations.
Second element of private equity strategy is funds target geography. Funds can target a particular country like PE funds in India, China etc. They can also focus on a particular region like Middle East, north America, North Africa etc.
Third element is the target sectors: Private equity investments can also be divided on the basis of industry sectors they target. Nowadays, these investments are made in various sectors including real estate sector in India, healthcare, technology, media, retail, energy, consumer products, financial services etc. Funds either target one particular sector or two-three sectors, referred as sector agnostic funds.
These are the three basic elements of private equity strategy that are taken into consideration.
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About Akansha Sharma 
Content Writer
2 connections, 0 recommendations, 23 honor points.Joined APSense since, December 11th, 2013, From New Delhi, India.
Created on Dec 31st 1969 18:00. Viewed 0 times.
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