Private Equity Funds

Private Equity Funds (Financial Buyers) are small groups of investors seeking to buy companies with $5,000,000 to $500,000,000 in annual revenues. They generally acquire companies for a percentage in cash (generally 30% to 70%) with the remainder paid when the Fund turns over the investment (generally 3 to 7 years.) They usually acquire companies to serve as a platform to buy additional companies in the same industry. Most of the time, they want key managers to stay on and participate in the growth and future of the business. In exchange, they will provide incentive bonuses, earned equity in the new venture, and stock options. Key management is expected to grow the platform company through sales and acquisitions while the Fund concentrates on strategic acquisitions. Because the business seller often has the opportunity to “cash out” twice in this type of sale it can be very lucrative for sellers who plan their exit strategy well in advance of their desired departure date.