Private Equity Investments

In finance, Private Equity is an Asset Class consisting of Equity Securities and Debt in operating companies that are usually not publicly traded on a Stock Exchange. A Private Equity Investment will generally be made by a Private Equity Firm, a Venture Capital Firm or an Angel Investor.

Private Equity

Private Equity (PE) Houses are involved in the purchase and acquisition of Shareholdings of Listed and Unlisted Companies. PE firms make these acquisitions by investing the capital they have raised from Institutional Investors, such as Pension and other funds.  See 

PE Houses create value by investing in shareholdings of companies (both majority and minority positions), active management of these portfolio investments over the medium- to long-term, implementation of value generation ideas within the portfolio companies and then ultimately, the realisation or sale of these companies.

PE Houses typically acquire companies which they believe are undervalued by the market and offer value-generation opportunities through company growth, financial and operational restructuring, the sale of assets or the strengthening of management etc. After this enhancement in value is achieved these companies are realised/ sold through trade sales, IPOs or sold to other PE Houses ( For Example Brait Private Equity buying 80 % of Virgin Active ). 

See our  INVESTOR Tab - above under - Christo Wiese - for more details. 

Private Equity and Venture Capital in South Africa

Private Equity is capital that is put into a new or growing business in return for part-ownership of the business and a share of the profits. Typically, a Private Equity or Venture Capital Investor does not want permanent ownership of your business. They want to " exit " your business within five to seven years by selling the shares you gave them, and they want a Return on Investment of at least  35 %  per year. In other words, if they invest R1 million in your business, they want to get at least R2,75 million when they sell their shares in five years' time.

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ETHOS - Private Equity 


The  Opportunity  via  Vantage Capital

Until early 2000, funding structures in South Africa comprised of only two components : Senior Debt provided by the Banks, and Equity that was provided by Private Equity Funds and other institutions such as the Industrial Development Corporation.

The Government's success in introducing a measure of macroeconomic stability and predictability has led to the emergence of a huge potential market for "mezzanine" products, which rank behind Secured Bank Debt but ahead of Equity, which are called Hybrid Products as they usually combine both Debt and Equity features. With Senior Debt sourced at rates of 10-15 % and Equity Funds targeting returns of 25-35 %, the space for Funders seeking to earn returns between 15-25 % has ballooned.
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Investment Banking  vs.  Private Equity

Big Picture Differences — The Business Model 

Put plainly, Investment Banking is an advisory/ capital raising service, while Private Equity is an investment business. An Investment Bank advises clients on transactions like Mergers and Acquisitions, restructuring, as well as facilitating capital-raising.

Private Equity Firms, on the other hand, are groups of Investors that use collected pools of capital from wealthy individuals, pension funds, insurance companies, endowments, etc. to invest in businesses.  Private Equity Funds make money from a) convincing capital holders to give them large pools of money and charging a  %  on these pools and b) generating returns on their investments.  They are Investors, not Advisors.
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Private Equity Is Top Choice of Young Wall St. Bankers

The popularity of Private Equity Firms — which use Investors’ money and plenty of debt to buy entire companies — has fed a tense standoff between these firms and the Investment Banks.

36 % of junior Investment Bankers who started two-year jobs in 2012 have now joined Private Equity Firms, while only  27.5 %  stayed in the same group at their bank.

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