“Opportunity
with the attendant risk brings promoters and investors together for creating
value. In a growth hungry economy with a scarce funding environment, PE offers
yet another resource for fueling the economic engine”
-
Kalpana Jain, Deloitte Touché Tohmatsu India Private Limited
About Private Equity Funding
There is no
universally agreed definition of private equity. Different academic studies and
private equity associations in various economies have defined private equity
differently depending on the activities they engage in those economies.
Private equity funding means to raise
the share capital for any private company or public company through investors
who want to invest their money in business that has potential of growth and
where investors gets handsome return on Investment. Private Equity is a source
of investment capital from high net worth individuals and institutions for the purpose of
investing and acquiring equity ownership in companies.
An important company metric for these investors is earnings before
interest, taxes, depreciation and amortization (EBITDA). When a private-equity
firm acquires a company, they work together with management to significantly
increase EBITDA during its investment horizon (typically between four and seven
years). A good portfolio company can typically increase its EBITDA both
organically (internal growth) and by acquisitions.
