“Private Equity” is the term that is used to describe operating companies that are not traded on an Exchange.
Funds are often raised by private companies through the sale of common stock, warrants, preferred shares, bonds or a combination of these instruments. The terms of the investment are often negotiated more directly by the issuing company with the investors and this could mean the terms more closely match the needs of the investors.
Private equity strategies are often used in raising venture capital, corporate buy-outs, re-organizations and in distressed investing.
Funds are often used to fund new technologies, execute growth initiatives or to simply pay down debt.
Investors are often institutions, pension funds and “accredited investors” who can commit sums of money for longer holding periods. These longer holding periods are often required in order to both execute the desired corporate strategy and provide liquidity for the investor. An example might be the eventual sale of the company or an Initial Public Offering.
Investors are reminded to review the current standards required to meet the definition of the wealthier, more sophisticated “accredited investor” with their Colwyn Investments advisor. These standards can change and they often vary from state to state. Private equity offerings or investments are not suitable for all investors and typically involve substantial risk, including potential loss of an entire investment.