Is it easy for private equity to borrow than the public company? I think it is harder becuase it does not have much credit.
The Jefferson Group is a large private equity firm managing a multi-billion dollar portfolio. Which of the following is the least likely source of value-added the Jefferson Group would provide to its portfolio companies than a public firm would?
A) Aligning the interests between private equity owners and limited partners. B) Reengineering the portfolio companies. C) Obtaining cheap credit.
Your answer: C was incorrect. The correct answer was A) Aligning the interests between private equity owners and limited partners.
The three sources of value-added a private equity firm provides over public firms are: reengineering the portfolio firms, obtaining debt on favourable terms (cheap credit), and aligning the interests between private equity owners (the limited partners) and portfolio managers.