Private Equity and Growth Capital in the UK
In today’s economic market, growth capital investments offer a diverse set of new opportunities and challenges for typical private equity investors. In most markets, private equity funds have historically relied on a combination of expansion opportunities and cost-cutting methods to help further value projections.
What is Private Equity?
For potential investors who are still a little unsure of what private equity investment really means, this essentially refers to capital or shares of ownership that cannot be publicly traded. For this reason, private equity is established through funds or private equity firms. In most cases, this form of investment includes investing in or a buyout of a large public company.
Private equity investments are typically used to help facilitate new acquisitions and mergers. It can also be used to help balance a company’s sheet and help instigate new developments and company-wide projects.
The main operations of a private equity firm include investing in companies and helping to facilitate mergers alongside buying out companies in financial difficulty and turning them around. It is for this reason that many funds and private equity firms are amongst the most powerful and wealthiest in the industry.
What to Know Before Investing
Today’s competitive macroeconomic outlook has challenged this historical approach. The slowing economic growth forecasts have meant that a new approach is necessary. The ability to offer profitable organic growth makes this a popular investment option within the current UK market.
Focusing value-creation efforts on the company’s top line and helping portfolio companies further understand how to approach a new market offers higher strategic value. This accelerated top-line growth has a powerful impact on the overall outcome of your investment.
Hard Work Means a Bigger Payoff
Choosing to focus on top-line growth is a great way to ensure an increase in both profit margins and overall revenue. In a B2B setting, this type of top-line acceleration can boost earning by up to 15%.
Firms that have the ability to spot any deficiencies in the commercial operations of a company find that this new top-line growth strategy provides new and lucrative investment opportunities. This is where the expertise offered by a private equity firms come into the mix. Firms like Goodwin are able to uncover value and new growth opportunities in the challenging UK market.
How is Private Equity Managed?
Private equity is typically managed by both managers and other associates that help to handle assets under management within both firms and funds. These firms often boast some of the top professionals in law, Fortune 500’s and accounting.
One of the key aims of private equity firms it to invest in underperforming companies and help to turn around their margins, making these companies more profitable, which in turn helps to boost efficiency levels and overall earnings.
Private Equity vs Other Forms of Equity Investment
It’s important to remember that private equity is different than the equity obtained through stocks. This is because it is private and not traded on any public exchanges. Private equity firms offer lower risks than venture capitalists as they choose to invest in larger, better established companies.