Sorry for such a naive question. I have been reading about it and read about different classifications of PE. But i still wonder how do private equity firms operate? do they have such divisions like Venture capital, buyouts? Also, what is the detailed job description of the junior analysts in such company?
Tried Wikipedia? http://en.wikipedia.org/wiki/Private_equity http://en.wikipedia.org/wiki/Venture_capital http://en.wikipedia.org/wiki/Hedge_fund http://www.usnews.com/usnews/biztech/articles/061122/22daniello.htm
Detailed job description: excel bitch
Basically, the US govt is now a PE company with 700bn AUM…
Where is that numi? He’d be delighted to tell you all about it
TheAliMan Wrote: ------------------------------------------------------- > Where is that numi? He’d be delighted to tell you > all about it He’ll also be delighted to inform you that you have no chance.
sid3699 Wrote: ------------------------------------------------------- > Tried Wikipedia? > > http://en.wikipedia.org/wiki/Private_equity > > http://en.wikipedia.org/wiki/Venture_capital > > http://en.wikipedia.org/wiki/Hedge_fund > > http://www.usnews.com/usnews/biztech/articles/0611 > 22/22daniello.htm Thanks i did try wikipedia befoer posting my question. didnt help much. efinancial careers explained it pretty well.
TheAliMan Wrote: ------------------------------------------------------- > Where is that numi? He’d be delighted to tell you > all about it Fine bring him in… but was it really such a naive question considering i graduated eight months back and on my first finance job…?
pretty simple to explain actually - PE is on the buy-side i.e. invetsment ideas are bought for their own accounts vs. something like IBanking which is on the sell side i.e. investment ideas are ‘sold’ to prospective investors. Their (ideal) business model is pretty straightforward too - search for public companies in trouble, raise debt to buy stakes in the company and take them private i.e. that company will become part of one of the PE firm’s funds, fire a bunch of people (essentially turn the business around), and then have the company go public again. LBO deals are subsets (not supersets) of PE deals. VC is on the buy-side too and works on the same lines as PE, the difference is that you don’t have to take anyone private to begin with. These are pretty basic explanations. Check out some of the big PE shops such as TPG and look at what they mention about the companies in their funds. Also, to give a humorous analogy, in the movie Wall Street when the British guy and Gekko are negotiating a buyout, that’s a PE or LBO deal right there. AND like numi will tell you, mighty impossible to get into PE right now unless you know someone from the inside / you are an ex-bulge bracket-ibanker. even then its gonna be hard right now coz there is no cash in pipeline to raise debt to fund said deals.
Private Equity was a great mechanism during the credit bubble boom. It was a device used by “fund mangers” to take over companies by issuing debt that could never get re-paid. The fund managers got huge fees by offering way more than the company was worth by using complex mathematical models that was really used just to disguise real value of the company so that the investment banks, companies, and fund managers would all get huge fees. Then, when the public company goes private, i.e., a hotel for example, and the great leadership of a private equity manager who knows nothing about hotels, fires a bunch of people, and gets the hotel to double its size by taking on more loans and debt, the hotel will go public once again, and more fees go to the fund manager. If you’re really good, the private equity firm goes public and has different countries and people invest in your company. In a nutshell, of course.
I never really understood how “the company” stood to benefit. Loading up on debt all in the name to take the company private. Why?
@thepinkman sometimes the constant pressure from research analysts to meet their lofty estimates and the resulting price action are too much to handle. plus, if the company is in peril, then i guess management feels that an experienced/public PE shop might have better luck in running the company despite the fees. it’s not like the management/board foots the bill anyway - shareholders, govt, and taxpayers do.
thepinkman Wrote: ------------------------------------------------------- > I never really understood how “the company” stood > to benefit. Loading up on debt all in the name to > take the company private. Why? There are a lot of benefits in taking a company private. See SOX, agency problems, public financial reporting…or just look at Koch Industries, a good example of why it’s better to be private. But obviously loading up on debt is a big burden if that’s what a company has to do to go private.