What Is The Job Of Private Equity Investors?

The world of private equity investment sounds alien and complicated to most of us. Even those of us who are in the corporate market for quite a while find it difficult to understand what do private equity investors actually do.

Private Equity India

Those, who are struggling with the question, what do private equity investors, actually do? Here is a break for you. There are basically three basic functions of private equity investors, which includes raising money from the partners, sourcing and closing deals, and improving operations. Let’s discuss them in a bit more detail.

Raising Money: Private equity firms primarily raise funds by getting capital from external institutes also known as LPs (Limited partners). This method is the prime source of raising money at least for private equity in India. The limited partners with whom the equity firm has collaborated has to commit a significant amount of capital to the firm. This is how equity firms raise assets for themselves and finally work.

Sourcing and closing deals: Before doing any acquisition, the firm closely studies the company in terms of its functions and assets. Private equity firms in India are quite particular about this aspect at least. They meet the senior managers in the team to devise a suitable strategy for better financial performance in coming years.
  
Improving operations: Acquisition of a company does not mean that equity investors will be taking up the job as CEOs or COOs. They definitely take one of the board seats and reshuffle some people in the senior management but the reins of the company is still very much in the main people’s hand who were present before. By making some amendments at the senior level, they aim to improve procedures and operations of the company.

For a newcomer, private equity is a bit complicated to understand but this is one of those important things on which major businesses strive.