Private equity is a complex financial construction best left to experts like Marc Leder, who works for world-renowned firm Sun Capital Partners. Through his work, he helps to raise capital that is then invested in private equity. This is one of the most popular wealth management strategies out there today, specific to people who have a high net worth. Private equity involves millions, if not billions, of dollars. Generally speaking, private equity investment firms are either public or, like Sun Capital Partners, privately owned.
The Difference between Private Equity Companies
- Private firms have a few huge shareholders, whereas public ones have small shareholders but in huge numbers.
- Private companies give their shareholders important operational roles and responsibilities. A public company, however, does not give its shareholders any authority.
- In private companies, all shareholders have a common agenda, but in public companies, they often have multiple agenda across its shareholders.
- In private equity companies, decisions are made very quickly. By contrast, a public company can take a long time to make any decision, because they have to get an agreement from all the different shareholders.
- A private company can change its management whenever it wants to, whereas public companies have to go through lengthy consultations and other complexities before making managerial changes.
- Private companies set their own regulations and do not have to meet many disclosure rules. Public companies, by contrast, have a wealth of disclosure requirements and even more regulations that they have to stick to.
- Private equity firms are very attractive to managers with talent, not in the least because salaries are very high. Interestingly, most private equity managers have been trained within public sector companies, only to move away later in their career.
Advantages of Private Equity Firms
- The investment scope in private equity is huge. They have the opportunity to find private startups, or new divisions within established corporations, and invest in them before they are listed. They can also search for listed companies that the stock market is ignoring, and completely take them over. Whenever a public sector company is privatized, it will go towards a private equity firm for help.
- Private equity firms make decisions quickly, but that does not mean they take uncalculated risks. They do a whole lot of research, analyzing a wealth of data, before they select a company to shortlist for growth.
- Private equity firm managers have to answer to their shareholders, who set deliverables and performance expectations. Each shareholder can be in direct contact with senior management for any reason
Making investment decisions is incredibly complex and always risky. This is particularly true with private equity, where the amounts involved in decisions are more than most people will be able to earn in a lifetime. People like Marc Leder are trained to manage this properly through established companies like Sun Capital Partners, assisting shareholders in creating high investment returns. This field is not for everybody, but those who feel drawn to it usually end up having very exciting careers.