Private Equity
Exclusive Performance
Private Equity has become widely democratized and is now accessible from as little as 100,000€.
This form of investment allows you to acquire shares in an private company, with the objective of realizing a potential capital gain upon its buyout or its initial public offering.
More simply, investing in Private Equity means investing in the real economy by directing your capital investment towards businesses.
Private Equity, a key asset for savvy investors
Private equity is a well-known and very important asset class. It has become a key component of asset allocation for both all savvy investors.
Investing in private companies offers the prospect of much higher returns than listed equities. Indeed, private companies often enjoy more robust growth, which translates into a significant increase in their valuation. Profits derive mainly from this increase in valuation between the time of initial investment and disposal, offering attractive returns when growth is sustained and successful.
The benefits of private equity
Access innovative, high-performance investment solutions with an affordable entry threshold.
Benefit from an asset class uncorrelated from fluctuations in the financial and real estate markets, offering high potential returns.
Benefit from turnkey management by teams of experienced professionals.
Opt for high-performance asset diversification that guarantees effective risk hedging.
The drawbacks of private equity
The absence of a capital guarantee is an inherent feature of private equity. Capital is directly invested in companies; success depends solely on judicious management to ensure profitability.
Liquidity is the major constraint of private equity. Since capital remains invested until companies are sold, it can be locked in for an extended period, usually at least 7 years, with very limited opportunities for withdrawal.
The different stages of private equity
Private equity is a fundamental part of the financing chain for companies, helping them to accelerate their development, with several possible investment strategies:
Venture Capital
This type of capital is the most talked-about in the press. These are investments by investment funds in young, innovative companies, often in the seed phase, mainly in sectors where there is technological or usage innovation.
The key to success lies in selecting the ideas and founders who are best placed to realize the proposed vision.
This is the riskiest investment, but when it succeeds, it is the most rewarding.
Capital Development
This involves investing in minority shares in an already profitable, mature company that wishes to increase its capital in order to make new investments crucial to its development.
The funds raised give the company the means to acquire new production tools, develop new products or services, or increase its working capital.
Earnings expectations remain attractive, and the profits already made by the company are reassuring.
Turnaround capital
This little-known form of financing is used to turn around a company in difficulty and put it back on the road to success. The capital provides operational support, and is conditional on an overhaul of strategy and often cost structure.
After a period of reorganization overseen by the private equity fund, a fresh start is created that generates profits.
Risk still exists, but it is concentrated on the success of the reorganization period. With the right selection and management, very good performances are often achieved.
Growth Buy Out
These operations are at the heart of regular private equity performance. Investments buy shares in a profitable company through a loan when the majority shareholders wish to withdraw from a business.
It is often used in the case of LBOs (leverage buy-out) or LMBOs (leverage management buy-out), which enable a company to be bought out through the debt of a holding company specially created for the operation, whose debt will be covered by the company’s profits.
The risk lies in the ability of the new team to take over the company and continue its development. Performance expectations are lower.
Private equity is a cornerstone of performance. Grounded in the reality of economic needs, it’s a diversification we recommend for customers preparing for the future.
When you have long-term ambitions, like our Growth Capital clients, Private Equity brings substantial gains.
Mael and Camille, CMK cofounders