Private Equity Fund Raising Deals

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Private Equity

Private equity is distinct from real estate in that investors buy commercial and residential properties to then sell for profit after a few short years. Instead, private equity invests in larger companies. This could lead to an investment limit that is higher as the profits of the business are distributed among the investors who invested into that fund. This is the reason why the business so profitable for private equity firms that make a profit from their fund management fees, carried interest and a portion of each deal’s earnings.

As new managers join the market, they will face an uphill task to raise the full amount of funds as LPs have been apprehensive of their performance and have reduced their allocations. However, a successful fundraising effort is contingent on planning and preparation. Fundraising is a game of momentum and GPs must have clear pathways to achieving their desired levels of committed capital prior to embarking to the market. They must also be clear about the sweeteners that they are willing to provide like scale discounts, early bird benefits or first-movers.

No matter if the target is a new investment vehicle or a buyout fund, many PE companies turn to placement agents to help them connect with LPs and to promote their funds. These professionals are paid an amount based on a agreed amount of money that the fund raises. In this way, it is vital for GPs to review their internal investor relations department’s capabilities before enlisting the help of a placement agent.