B.I.M. is looking to move from being an investment club to an investment group or even a private equity firm. With the coming change in the political climate and perhaps global investing we have look beyond the local investment community as the foundation of the group. Here are some key differences between private equity and investment group. Let us know your thoughts and how you can become a part in the comments section.
Barriers to Entry
Private equity firms invest funds from wealthy individuals, as well as large endowments and pension funds, to purchase promising companies. Most investment groups, from small investment clubs to larger corporate interests, have much lower barriers to entry. Smaller investors who see the potential in a firm can pool their money and buy into the company, while private equity funds buy the entire company in an effort to sell it at a profit at a later date.
Before they purchase a company, private equity funds often hire industry experts, usually veterans in that company’s industry, to investigate the target firm’s performance. These analysts examine fluctuations in the target’s bottom line over the recent past, as well as how it stacks up against its competitors. While many large investment groups also conduct such research, some smaller agencies may not have the time or resources to carry out due diligence procedures.
Goals and Objectives
The goal of a private equity firm is to purchase a company, invest in its growth, then turn a profit for its investors by selling the entire firm to a larger interest. An investment group also seeks to grow a company and make a profit. However, these groups may not always buy the entire company, but purchase shares (majority or minority) and see their profits through the firm’s improved operations rather than its sale.
When a private equity fund buys a company, they often seek to replace upper management with their own people. These new managers operate under the direction of the fund and may not share the previous management’s vision. An investment group may choose to keep the current management if they see promise in the company’s progress. The group may also have long-term goals for the company and wish to promote stability, rather than turn a quick sale.