Tyler Tysdal family office entrepreneur specializing in private equity and real estate is an expert in all matters relating to private equity.
Private equity has taken a large place in the current market, but it is not well understood as a whole. The simplest and most effective way to describe it is as an interest in a business that is not publicly listed or traded on the stock market or any market. It usually comes from high net worth individuals who will purchases shares of companies or actually take them over and run them. The majority of this type of business usually relates to pension funds and large private equity firms who are classed as accredited investors.
As the investment is made directly into the firm it does give the investors some and often a lot of influence over how the business works and how it is run. The capital outlay is usually very large, and some have a minimum investment of a quarter of a million dollars some up to one million. The investors therefore deem that this level of investment and commitment offers them the right to influence or even control business workings and decisions.
The aim as with any investment is to try and receive positive returns and again this is another reason that the investors like to be able to influence the investment decisions. The funds that are raised are shared between the shareholders and the investment is usually held for between four and seven years.
Due to the types of client that this involves and the chance of making lots of money then the private equity market has attracted many top firms and employees. Legal companies and Fortune 500 companies have wanted to have part of this action. The fee structure is often made up of a management fee and also a performance related fee; this is usually about 2% of the value of the assets and sometimes up to twenty percent of the profits. When you are talking of million-dollar investments then these sums are obviously very large amounts of money. You can therefore see why this is a lucrative business to get into that attracts top professionals. You can get six figures sums from one client alone in salary and bonuses.
The different types of equity firms that exist are those who are strict financial investors, those who want control of the business, those who do not want any control just to make money and will rely on the current management to take control and make great business decisions. The investors who want control will very often be successful business men who have many contacts and expertise. They can often invest when they can see a way for business to be improved and thus feel that they can guarantee the company’s success.
Large investment banks also compete with private equity firms. They will have a list of investors and they will look out for good deals for them that fit their requests.