What is Private Equity?

Private equity includes investing in a private company and investing in a public company, and bringing that public company private. In this video we discuss:
0:00 - Introduction
0:07 - What is private equity?
0:50 - Private Equity vs Venture Capital
01:08 - Growth Capital
01:42 - Detailed example of the buyout process
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Disclaimer: All investment and financial information expressed in this video is for educational purposes only.
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[@AbhinavShah21]

Such an easy and precise example. Thank you so much!

[@SteveBalaban]

Thank you for your comment, Abhinav!

[@ninarazarenova]

That formula is true for the first year andcan actually work only under condition that "everything will be okay", EBITDA will still remain the same etc. (or ceteris paribus.)

[@kevinmei6092]

Thank you for your video

[@SteveBalaban]

Thanks for your comment, Kevin!

Nice video, very useful.

[@SteveBalaban]

Thanks Luxus!

[@builtenvironmnentcontracto8809]

Great explanation

[@SteveBalaban]

Thanks!

[@nadirrabah6756]

hello Stephen how are you real quick I wish to learn about private equities but you're in Canada and I'm in Florida United States do the laws and rules and knowledge still apply between our countries?

[@SteveBalaban]

Hi Nadir,
Thanks for your question. While I'm located in Canada, most of the information is applicable around the world.
If you have any specific questions, please don't hesitate to let me know.

[@BoneKrusherKate]

So if you only focus on growth company that are more mature can you create a P/E company that only really focus within that area? For example let's say: Company A invest into Boeing (BA) can it just invest into it and hold for a long period of time or does it have to sell its shares if it isn't going to make it private? Can someone help me

[@SteveBalaban]

Hi CaptainDunzo, thanks for your question. You can create a PE company to focus on a certain type of investment (such as stage, geography, sectors, etc). So yes, you can just focus on providing growth capital if you wanted to.
As for Boeing, it's a public company. You could hole shares for a long period of time and not sell it. If you did that, that would not be private equity, but a public equity investments.
Speaking of Boeing, as of today (March 22, 2020), Boeing is trading at $95. It was over $400 in March 2019.
Let's hope everything with COVID-19 gets better worldwide!

[@ahmedxh]

So in the real world do private equities get involved in Venture capital? Or only buy outs. Thanks

[@SteveBalaban]

Thanks Ahmed. If a venture capital investment is in the form of equity, technically, by definition, it is a "private equity" investment in an early-stage or fast growing company. In North America, the term "private equity" usually refers to "buyouts". In the real world, private equity funds have to state their mandates (ie. industry focus, size, etc) in advance of deploying the raised capital. As long as an investment is in their mandate, the fund may invest in it. All else being equal, buyout funds won't invest in venture capital, and venture capital won't invest in buyouts.
Does that help? Please feel free to ask me to clarify if this is not clear.

[@ahmedxh]

Steve Balaban It means a lot you took the time to answer elaborately. I rarely subscribe to anything But I’m subscribing to your channel now. thank you

[@cryptopirate8880]

private equity is raised from where?

[@marlonholland955]

limited partners fund in money. limited partners = rich people

[@SteveBalaban]

The biggest investors are Institutions (Pensions, Endowments, etc) and Individuals (family offices, wealthy individuals). We talk about it more in the following video titled "Who Invests in Private Equity": bit.ly/2QED5vr