Private Equity Law

In finance, private equity is a class of assets consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. Private equity investments are usually made by private equity firms, venture capital firms, or angel investors. Each type of investor provides private equity funding for different reasons, but all provide working capital to business to nurture expansion, the development of a new product, or a restructuring of the company's operations, management, and/or ownership.

Among the most common investment strategies in private equity investing are leveraged buyouts, venture or growth capital, and mezzanine capital.

Leveraged Buyout

In a typical leveraged buyout transaction, a private equity firm buys majority control of an existing or mature firm. The companies involved in these transactions are typically mature and generate operating cash flows.

Venture or Growth Capital Investment

Investors invest in young, growing, or emerging companies. rarely seeking to obtain majority control. Venture and growth capital are similar, except that companies that seek growth capital are likely to be more mature than venture capital funded companies, able to generate revenue and operating profits but unable to generate sufficient cash to fund major expansions, acquisitions, or other investments.

Mezzanine Capital

Mezzanine capital refers to subordinated debt or preferred equity securities that are usually the most junior part of a company's capital structure, but still superior to the company's common equity. Mezzanine capital is often used by smaller companies to allows them to borrow additional capital beyond the amounts traditional lenders would be willing to provide via bank loans. In exchange for the higher risk, mezzanine debt holders require a higher return for their investment than other secured investors or more traditional lenders.

For more information on private equity, please have a look at the articles and materials found below on this page. Similarly, for specific information regarding your private equity legal questions, please take a look at the Law Firms page for a list of attorneys in your area who can help.


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