The private equity industry has exploded into a multi-trillion dollar market.
Private equity funds get their money from large institutions such as public and
private pension funds, insurance companies, high net worth investors, sovereign
wealth funds, and others. The managers of the funds use their knowledge and
expertise to purchase majority ownership in private companies.
The goal of these investors is to grow the business and either sell it or take it
public. Because they command capital resources outside the capability of most
private business owners, they have more options to grow the company. In many
cases, the business owner may stay on with the company, having received a large
payment for their equity and teaming with the investors to build out the
Private Equity is called "patient money" because these investors usually look
at longer time horizons than many investors. Usually they will anticipate a five
to seven year hold on the equity as the business grows in value. If the goal of
building value is achieved, the minority stake retained by the business owner
will grow as well.
This option may be attractive to you if you are looking to diversify your assets, yet
want to continue to build your business. However, you usually must be willing to cede
control of the company and its direction to your new business partners. Redtail
Capital has established relationships with a large number of private equity
firms and can help put you in front of the right potential partner.