All About Private Equity

All About Private Equity

“The role of private equity as fiduciaries is certainly to make money” ― Thomas G. Stemberg
3 min read
Private Equity

All About Private Equity

“The role of private equity as fiduciaries is certainly to make money” ― Thomas G. Stemberg

3 min read

Private equity firms are influential players in the financial world, specialising in investments in established companies with the aim of driving growth, improving operational efficiency, and generating significant returns for investors. Essentially, buying a proportion or entirety of a company with the aim of making it profitable and selling. 

In this article, you will find out all you need to know about private equity firms and how they may impact your returns.

Their Core Functions

Private equity firms primarily focus on acquiring ownership stakes in established companies through various investment strategies, including leveraged buyouts (LBOs), management buyouts (MBOs), and growth equity investments.

These firms typically seek controlling or significant minority stakes in their portfolio companies, allowing them to exert influence over strategic decisions and operational matters.

Private equity firms provide financing to companies at different stages of their lifecycle, from mature enterprises seeking expansion capital to underperforming businesses in need of restructuring. By deploying capital and expertise, private equity firms aim to enhance the value of their portfolio companies, drive operational improvements, and ultimately deliver attractive returns to their investors.

How Do They Invest?

Private equity firms employ various investment strategies tailored to the specific characteristics of their target companies and investment objectives.

Put simply, they invest using many strategies!

Leveraged buyouts (LBOs) involve acquiring companies using a significant amount of debt financing, with the aim of restructuring operations, reducing costs, and improving profitability.

Management buyouts (MBOs) entail the purchase of a company by its existing management team, often in partnership with a private equity firm, to facilitate a change in ownership and drive growth.

In addition, private equity firms may pursue growth equity investments, which involve providing capital to companies with proven business models and scalable operations, aiming to accelerate growth and expansion. These investments typically target companies in high-growth sectors such as technology, healthcare, and consumer goods, offering the potential for substantial returns over the long term.

Risks and Rewards

Whilst their investments offer the potential for attractive returns, they do come with inherent risks, including execution risk, market volatility, and economic uncertainties.

Leveraged buyouts, in particular, involve significant levels of debt, exposing investors to financial leverage and interest rate risk.

Additionally, private equity investments are illiquid in nature, with capital typically locked up for several years, requiring investors to have a long-term investment horizon and tolerance for illiquidity.

However, successful private equity investments can deliver substantial rewards, including capital appreciation, dividend income, and potential tax benefits.

By actively managing their portfolio companies, implementing operational improvements, and driving strategic initiatives, private equity firms aim to maximise value creation and generate superior returns for their investors over the investment lifecycle.

Is Private Equity Right For You?

Determining whether private equity aligns with your investment goals, risk tolerance, and financial circumstances requires careful consideration and due diligence.

While private equity investments offer the potential for attractive returns and diversification benefits, they also entail inherent risks and illiquidity.

Fear not!

Patterson Mills is here to assist you in assessing your investment horizon, liquidity needs, and comfort level with risk before committing capital to private equity funds or direct investments.

Remember, you are not alone.

Get in touch with us today and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.