community that composes private equity and venture capital investing is
composed of merchant banking subsidiaries or divisions of large institutions.
- Bank Holding Companies;
- Insurance Companies;
- Large Industrial Corporations;
- Investment Banks.
addition, there are many free-standing specialized investment bodies that form
solely for PE/VC investments. Some of these include publicly or privately-held
SBICs, publicly-held BDCs or privately-held funds formed to make such
investments such as partnerships or LLCs.
Objective of a Private
Equity/Venture Capital Fund
fund generally augments its funding from a limited number of sophisticated
investors in a private placement such as:
- Public and Private Employee Benefit
- University Endowment Funds;
- Bank-holding and insurance
- Wealthy families.
profits achieved by the fund are then split between PE/VC professionals and
capital providers/investors on a pre-negotiated basis.
20% of the new profits go to the PE/VC professionals as a carrier interest,
while the remaining 80% going PE/VC professionals and the capital providers in
proportion to the capital supplied.
a variety of different transactions that professional PE/VCs generally plan and
execute that include:
- Growth-equity investments;
- Leveraged and management
- Leveraged re-capitalizations;
- Industry consolidations;
- Troubled company turn-arounds.