What is Private Equity?

Private equity funds are privately managed investment pools created to invest in private companies in the development or growth stages, or in connection with a buyout or recapitalization of a company. There are a variety of sectors within the private equity industry. Some private equity funds focus on specific industries, such as high technology, telecommunications, oil & gas, mining or the retail sector. Other private equity funds are focused on a specific type of investment, such as venture capital, mezzanine or distressed debt or buyouts.

Canadian Private Equity in 2007

A recent survey by McKinsey & Company and Thomson Reuters Canada, "Private Equity Canada 2007” reported, “Despite a changing market climate, the capital pool managed by PE investors in Canada increased in 2007. The survey found Canadian PE funds under management totalled $76 billion in 2007. This is 16 percent more than the $65.5 billion reported in 2006.”

Capital management of private equity pools was made of three primary yet different segments (i) Mezzanine Financing (8%); (ii) Management led Buyouts (62%); and (iii) Venture Capital Financing (30%).

Advantages of Private Equity

In general, Private Equity can hold a lower level of competitiveness in the market compared to Public Markets. With Private Equity Markets, managers are opened to performing a more comprehensive due diligence report prior to committing investors’ funds. Private Equity market investment managers review confidential internal documents such as lists of customers and suppliers as well as interviewing current employees. On the other hand, most due diligence reports for Public Market offerings are made based on a public set report prepared for potential investors.