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Key facts about private equity

Private equity is a term that many people are still unfamiliar with. However, it is important that you are informed about this type of investment. So what is it? In this article, we present to you what you need to know about the subject.

What is private equity?

To put it simply, private equity is a set of assets that support a company throughout its life cycle. If you are interested in this type of investment, some structures through their websites can guide you in the process.

What is it really about?

Known in French as capital-investment, private equity consists of acquiring shares in a company that is not listed on the stock exchange in order to make significant profits. In this case, it is a question of financing the structure in question in order to obtain a higher capital gain.

An individual can easily invest in this sector through a specialized fund or directly through the capital of a company. It is therefore an excellent way of diversifying your assets away from the financial markets and their fluctuations. It is also generally supported by tax incentives.

The different asset strategies

In fact, there are four categories of private equity that represent different wealth strategies. The first is venture or innovation capital, which consists of financing the creation or start-up of a new company.

Next comes development capital. This allows the company to grow or expand. In third position, transfer capital takes place. It is used in the case of the transfer of a structure. Finally, turnaround capital is intended for the recovery of a company in difficulty by giving it a new lease of life.

How it works

First, private equity can take the form of debt. This is most often obtained from commercial banks. Secondly, it can also take the form of a share that will give you access to the company’s capital.

Acquiring shares will therefore give you privileges and access to profits. Finally, there is the bond, which is a mezzanine debt. Its repayment is in fine and can be defined by the company.

Funds and vehicles used

There are three main funds that can help you as an individual to acquire shares in a company. These include: Venture Capital Funds (FCPR), Professional Private Equity Funds (FPCI) and Proximity Investment Funds (FIP).

The first consists of investing up to 50% in an unlisted structure. The second will lead you to finance up to 60% of innovative companies. The last one will allow you to acquire shares in the same way as the previous one, but this time in regional SMEs.

All in all, private equity is an indispensable support in the life cycle of a company. However, before investing, find out about the different strategies to be used, the methods of intervention and the vehicle funds.