Private Equity Best Practices: Understanding the Essentials of Private Equity: A Guide to Growth and Opportunity – Part 2
Understanding the Essentials of Private Equity: A Guide to Growth and Opportunity – Part 2
The Process of Buying a Company through Private Equity
Private equity firms typically create a new company (often called Newco) to acquire a target company. The financial structure for Newco usually comprises a mix of equity from the PE fund and potentially other sources like loans, preferred shares, or equity from the vendors of the target company, as well as the management team. This setup ensures that all stakeholders, including the management team who are often required to invest their own funds, have a vested interest in the success of the venture.
The negotiation of ownership stakes in Newco is determined by the value of the target company and the relative amounts of funding provided by each party involved. This process underscores the importance of negotiation power and the strategic structuring of financial contributions for the acquisition.
Why Choose Private Equity?
Partnering with a private equity firm can be a transformative experience for entrepreneurial leaders, enabling professional growth, business expansion, and operational transformation. The expertise and financial backing provided by PE investors support the realization of profits for all shareholders over time, typically between three to seven years.
Private equity investment represents a compelling route for businesses seeking not just capital but a partnership geared towards fostering long-term growth and scalability. As businesses contemplate this path, understanding the nuances of how PE works, the structure of funds, and the acquisition processes involved becomes paramount to leveraging private equity effectively.
In conclusion, private equity embodies a synergy of capital, expertise, and strategic growth. For businesses on the brink of expansion or transformation, it offers a pathway not just to funding but to a partnership enriched with the experience and insights necessary to thrive in today’s competitive landscape.
Benevolent Capital
At Benevolent Capital we have carved a niche for our investors by seamlessly blending traditional family values with cutting-edge investment strategies. Our approach is characterized by a thoughtful fusion of innovation and prudence, ensuring that every investment aligns with the long-term vision and legacy goals of our clients.
As principals we co-invest our own money in every deal we participate in, we do not charge our investors management fees, investors receive a 100% preferred gross return on their investment. After the 100% return (a 2X) the investor will receive a 70% net return with a 30% promote to the GP. This arrangement makes Benevolent Capital a trusted partner in safeguarding and growing wealth for our investors.
Benevolent Capital includes a world-class group of partners, associates and investors, and our portfolio now spans catalytic investments in venture capital, private equity, real estate development and a diverse collection of global professional soccer franchises. Our wide range of experience from managing successful companies, to completing management buyouts, acquisitions, and a wide variety of debt and equity investments totaling over $4 billion enables us to truly partner with the entrepreneurs and management teams of our portfolio companies and provide hands-on support and guidance towards realizing their full potential. Benevolent Capital has a proven track record of successful investments. Notably, our $200k investment in seed capital for Enzymatics, a biotech firm later ultimately acquired by Invitae (NASDAQ: NVTA), has yielded over $30MM in total returns for Benevolent Capital’s investors.
What sets us apart is not just our financial acumen but also our dedication to fostering meaningful relationships. Going beyond conventional investment practices, we prioritize open communication and transparency that allows us to build trust with our stakeholders, as principals we co-invest our own money in every deal we participate in making Benevolent Capital a trusted partner in safeguarding and growing wealth for our investors.
In an ever-evolving financial landscape, our expertise, coupled with Benevolent Capital’s commitment to hybrid family office investments, paints a picture of success, where financial prosperity meets enduring values.
About the Author
Brett M. Johnson, founder and CEO of Benevolent Capital, founder and partner of Fortuitous Partners, and co-founder and chairman of Rhode Island FC. He has a bachelor’s degree from Brown University and a Masters of Business Administration from the Presidential/Key Executive program at Pepperdine University. Brett is also a graduate from the Harvard Business School’s President’s Leadership Program in 2014. An active member of the Young Presidents Organization.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Always consult with a qualified financial advisor or wealth manager before making any investment decisions.
