Private equity funds
Private Equity relies above all on people’s expertise and experience. It brings together the skills of fund managers, analysts and company executives in a common goal of value creation.
An essential catalyst for economic development, Private Equity is now recognised as a driving force behind business growth, job creation and the promotion of a new generation of managers.
Within just a few years, the Private Equity market has developed tremendously, regularly generating strong performance for investors.
Highly specialised, the Private Equity industry relies on skilled managers to identify talent and investment opportunities.
In order for investors to benefit from Private Equity, Societe Generale Private Banking has selected a large range of Private Equity products (direct funds, funds of funds, and structured Private Equity products) whilst insisting on the quality of the investment process and experience of teams.
The range of Private Equity strategies
Businesses typically go through several phases in the course of development: from start-up, it will go through various growth periods and progress to maturity, sometimes hitting a few rough patches too. Each of these corresponds to a different Private Equity type: venture capital, growth or expansion capital, buyouts or LBOs, and turnaround or mezzanine funds.
Private Equity investors provide on-going support to businesses throughout their development
Private Equity and the life cycle of a business
Investment in young and innovative companies seeking private finance either on start-up or shortly after their first technical and commercial developments. Such new businesses generally tend to emerge within the New Technology of Information and Communication (NTIC) sectors, life sciences or electronic and new materials sectors.
Growth or Expansion Capital
This is the holding of minority shares in the capital of an established and generally profitable business.
The selected businesses have strong growth potential which requires a consolidated financial structure in order to develop new products or services, set up subsidiaries abroad, make an acquisition or increase their productivity.
Buyout or Leveraged Buyouts (LBOs)
The buyout of mature and profitable companies using financial leverage debt. Buyouts can involve small and medium companies with a multi-million euro turnover, as well as large multinationals.
Investment opportunities go from the sale of a family business, the sale of an industrial group subsidiary, the privatisation of a listed company, to even the reorganisation of shareholding (e.g. a secondary buyout).
Special situations essentially involve investments in subordinated debt (or mezzanine debt), where investors look to improve their returns by also seeking equity participation, for instance, through options, warrants, subscription rights, etc. This category also includes distressed debt, project financing or business turnaround management.
Whilst the average length of time for investments in private companies averages between 3 to 7 years, an investment vehicle such as a Private Equity fund generally has a lifespan of ten years. The opportunities for intermediate divestiture are limited: the investor is committed to a long-term investment with invested sums only being returned as gains (or losses) generally paid out over the last few years.
Private Equity Offer
There are a number of ways to invest in Private Equity:
The investor chooses to manage his or her own investments in private equity companies. The investor may have a specific overall strategy, or simply aim to hold a number of diversified assets under management. This approach is a high risk one, as each holding exposes the investor to direct risk. The risk factor may be mitigated by diversifying the portfolio into a significant number of investments; however, this may require very high levels of Private Equity investment, which may be incompatible with an overall asset management policy.
Private Equity Funds:
Private Equity funds usually have direct holdings in twenty or so businesses. The management teams who run these funds are usually divided into specialist teams focusing variously on activity, investment type or even geographical area. Disparities in performance between management teams are very high; this is why selection of the right team is a key factor in future performance. Moreover, it can be very difficult to access these teams. Such teams usually prefer to deal with their existing investors and fix very high minimum commitments.
Private Equity Fund of Funds:
Funds of funds are a good way to gain access to all areas of Private Equity with a highly diversified approach. Using this method, an investor can indirectly participate in financing several hundred businesses. Private Equity fund of funds managers keep in constant touch with the market, and have an up-to date knowledge of trends and available or possible fund investment opportunities.