23 Jun


  • Posted by Clear Rock

What is a Private Equity Fund?
We spend a lot of time talking about Private Equity funds (or Private Equity Groups – PEG’s as we often call them). Recently though we got a sheepish question from an associate: “I get it, the invest in stuff. But exactly what IS a private equity fund?”

We had a long winded answer cooked up about how its a vehicle that is funded by investors for the purposes of organizing various investments etc etc. Then we stumbled across this paper. It’s UK oriented, but really, if you ever had any questions about the PEG world, how they are structured, who’s involved, etc… take the time to flip through it.


pe deals by sizeOftentimes companies we work with think that they’re too small to be aquired by a PEG. While that may be the case in certain instances, in the majority of cases (at least those that we work with), private equity is a very viable transaction partner. Private Equity groups aren’t limited to doing megadeals.

As this chart by Pitchbook shows, 30% of deals are less than $25 in value. Furthermore, when a fund has a “platform” company that a smaller company compliments they often don’t have a minimum deal size (these are so called “add on” acquisitions._

Beyond just the size dynamics, PEGs are a robust portion of the buyer universe. While the differential of valuation mutliples paid by PEGs and strategic buyers will vary from year to year, they are nonetheless often far more competetive than the option of self-financing a deal to a private buyer or employee.


In most important life decisions you don’t shut down opportunities early. It makes sense to research options, understand how they fit with your circumstance, and work towards the best outcome. Understanding what a PE fund is and how they fit into the M&A world is a cornerstone of a successful M&A exit strategy.


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