Private equity securities are issued primarily to instituational investor via non-public offerings, such asprivate placements.
There are three primary types of private equity investments: venture capital, leveraged buyouts, and private investment in public equity (or PIPE).
Venture capital investments provide “seed” or start-up capital,early-stage financing, or mezzanine financing to companies that are in the early stages of development and require additional capital for expansion.
A leveraged buyout (LBO) occurs when a group of investors (such as the company’s management or a private equity partnership) uses a large amount of debt to purchase all of the outstanding common shares of a publicly traded company.
The group of investors acquiring the company is primarily comprised of the company’s existing management, the transaction is referred to as a management buyout (MBO).
The third type of private investment is a private investment in pubic equity, or PIPE.
This type of investment is generally sought by a public company that is in need of additional capital quickly and is willing to sell a sizeable ownership position to a private investor or investor group.
