Private Equity Comes Public

By James McEvoy

For years some people have wondered how firms like Blackstone and KKR came up with hundreds of millions, and even billions of dollars to take over companies, take them private and sell them at a huge profit. Now the insight as to how they operate, and structures that protect them, and the relationships they hold dear are coming to light. What does this mean to a newcomer, or a business thinking about Private Equity? It means they get to see much more transparently than before how a Private Equity firm operates, how they obtain their money, and how they protect their profits.

Most Private Equity firms were established by partners who have a history in the financial industry. They have established relationships for a long time with their bank and others, and because they hold the credibility of being a good decision maker/investor, when they choose to buyout or takeover a firm, it is not hard for them to convince banks, pension or hedge funds to back them in their ventures.

A long time ago it was only the super wealthy and royalty that held privileged relationships with financial institutions. Today, thanks to the internet and ease of networking, start-up firms who wish to do large equity deals, new developments new inventions, has streamlined the process of building a powerhouse network. Today the average new networker with around 10 hours a week or more of networking online and offline, putting good business plans together, and learning how to leverage their network, can become a powerhouse in whatever industry they are dealing in.

So Private Equity is not starting to become public equity, deals are getting larger, commissions getting larger, and the status of some people in society is changing as fast as the weather. So as Private Equity keeps ramping up deals, and putting themselves on the stock exchange to raise additional money, we keep seeing how they deal, and in some ways, getting a free learning experience of what we need to do if we want to follow.