Private Equity

Everything You Wanted to Know About PRIVATE EQUITY: Strategies, Market Size, and Trends

PRIVATE EQUITY (PE) is a significant force in the global economic landscape. It involves investing in private companies — those not listed on public stock exchanges — with the goal of achieving substantial returns on investment through strategic improvement and eventual sale. This article covers the essence of Private Equity, the various strategies employed, the current market size, and the latest trends shaping the field.

What is PRIVATE EQUITY?

Private equity refers to investment in private companies or in public companies intended to be taken private. Unlike investing in traded equity — which involves buying shares of companies listed on stock exchanges — private equity involves directly investing in or fully acquiring companies. The goal is to improve the company’s value over time and eventually sell it for a profit.

Private equity investments typically target companies that are not operating at their full potential or are undergoing significant changes, such as companies in financial distress or those with strong growth potential. PE firms provide not only capital but also strategic guidance, operational improvements, and management expertise to enhance the value of their portfolio companies.

What Are the Core Strategies in the World of Private Equity?

Private equity firms use a variety of strategies to achieve their investment objectives. Each strategy targets different types of companies and involves different approaches to managing investments. Here are some of the most common strategies:

1. BUYOUT — Buyouts, including Leveraged Buyouts (LBOs), involve acquiring a company and taking control of its operations. In a typical LBO, a PE firm uses a combination of equity and significant amounts of borrowed money (leverage) to acquire a company. The goal is to improve the company’s performance and financial health, and ultimately sell it for a profit.
2. GROWTH — Growth investments are made in relatively mature companies seeking capital for expansion, entry into new markets, or funding of major initiatives. Unlike buyouts, growth investments do not involve taking control of the company. Instead, they provide financing to accelerate growth and achieve strategic goals.
3. Venture Capital — Venture Capital (VC) is a sub-category of private equity focused on investing in early-stage companies with high growth potential. VC investors provide capital to startups and new businesses in exchange for equity, often becoming actively involved in the company’s development.
4. DISTRESSED Assets — Investing in distressed assets involves acquiring companies that are in financial difficulty or facing bankruptcy. PE firms specializing in distressed assets aim to rehabilitate and turn around these companies, ultimately selling them at a profit once they are stabilized.

5. Secondary Market — Secondary investments refer to purchasing shares or investment rights at a later stage in the life of a company or investment fund, rather than at the initial investment or first funding round stage.

In the case of private investment funds (venture capital), secondary investments refer to purchasing portions of the existing investors’ holdings in the fund — that is, buying the stake of existing investors who may wish to sell their investment before the fund’s life ends.

The advantage of secondary investments is that they may offer opportunities to acquire shares or assets at more attractive prices, since there is often more information available about the company or fund than at the initial investment stage.

What is the Size of the Private Equity Market?

The private equity market has experienced significant growth in recent decades. According to data from Preqin and other industry sources, as of 2024, the global private equity market is valued at no less than $7 trillion in assets under management (AUM). This growth reflects the growing popularity of private equity as an investment category and its expanding role in the global economy. Hundreds of transactions take place each year, with the largest PE markets being the United States and Europe, and growing activity in Asia and emerging markets.

Market growth is driven by several factors, including the search for high returns in a low-interest-rate environment, the development of sophisticated institutional investing, and the ability of PE firms to add value through active management.

What Are the Latest Trends in Private Equity?

The private equity field is dynamic, constantly evolving in response to economic conditions, technological innovations, and shifts in investor preferences. Here are some of the latest trends shaping the private equity landscape:

1. Increased Focus on Environmental, Social, and Governance (ESG) Factors

There is a growing focus on ESG factors in private equity. Investors are increasingly demanding that PE firms integrate ESG considerations into their investment decisions and operations. This trend reflects a broader societal shift toward responsible and sustainable investing, and toward IMPACT investments: a focus on investments that generate positive social and environmental outcomes alongside financial returns.

1. Technology-Driven Investments

Technology continues to be a key driver of private equity investments. PE firms are increasingly investing in startups and companies undergoing digital transformation. The rise of Artificial Intelligence (AI), machine learning, and other advanced technologies offers new opportunities for value creation.

1. Diverse Deal Structures and Financing Options

PE firms are becoming more creative with deal structures and financing options. This includes the use of innovative financial instruments, hybrid financing models, and customized solutions for different investment needs. In this context, we also note the trend of CO-INVESTMENT: opportunities for limited partners to invest alongside the main fund.

1. Increased Competition

As the private equity field continues to attract significant capital, competition for quality deals has intensified. This has led to rising valuations and pressure to achieve outstanding returns. We observe high valuations stemming from increased competition that drives up prices for acquisition targets. In terms of deal sourcing, there is a greater emphasis on originating unique opportunities and accessing non-public markets.

1. Global Expansion and Emerging Markets

Private equity is increasingly expanding beyond traditional markets such as North America and Europe. Emerging markets, particularly in Asia, are becoming more attractive due to their rapid economic growth and expanding middle class. This is achieved primarily through local partnerships: collaborating with local firms to navigate regional complexities, as well as working with regional funds by creating funds focused specifically on emerging markets.

Who Can Invest in Private Equity?

Only investors who meet the criteria of a qualified investor can invest. Here are the criteria under Israeli law:

Financial Assets: An individual must hold financial assets exceeding NIS 8 million, excluding their primary residence.

Annual Income: An individual must have an annual income exceeding NIS 1.2 million, or NIS 1.8 million jointly with a spouse, in the past two years.

Combined Income and Assets: A combination of annual income exceeding NIS 600,000 and financial assets worth at least NIS 5 million.

Qualified Entity: Institutional bodies such as insurance companies, pension funds, and provident funds, as well as corporations with equity exceeding NIS 50 million, may also be considered qualified investors.

How Can Private Investors Gain Exposure to Private Equity?

Investing in private equity offers significant opportunities but also involves meeting very specific criteria. Only qualified investors can invest in this asset class.

Investment can be made in two ways:

Direct Investments: Direct investment in private companies or startups. This can be done through networks, industry events, or introductions through financial advisors.

Or through Fund Investment: Investing through private equity funds managed by PE firms. These funds pool capital from multiple investors to invest in a diversified portfolio of companies.

What Are the Private Equity Investment Funds That VALUE Works With?

Carlyle Partners VIII – Carlyle’s eighth flagship private equity fund. A Buyout strategy fund investing in growth-focused companies in North America across the six sectors in which Carlyle specializes, including technology, retail, healthcare, industrials, aerospace & defense, and financial services.

AlpInvest Co-Investment Fund IX – A private equity fund with a Co-Invest strategy for joint investment in large-scale complex deals alongside leading global private equity fund managers. The fund focuses on investing in companies across various industries and geographies and is managed by AlpInvest Partners, a leading global private equity manager with a long history in the industry.

AlpInvest Secondaries Program VIII – A private equity fund with a Secondary strategy. The fund’s strategy seeks to capitalize on the liquidity needs of fund managers and existing investors in order to achieve potential discounts when acquiring high-quality underlying assets with significant growth potential, and to provide diversified exposure across industries, assets, managers, and vintage years.

Cinven VIII – Cinven’s eighth flagship private equity fund. A Buyout strategy fund focused on leading companies in Europe and North America. Cinven aims to drive growth in its portfolio companies through international initiatives, product development, and operational improvements. Cinven has a strong and proven track record of value creation with deep sector expertise across a range of industries, including financial services, retail, healthcare, technology, and industrials.

Vestar Capital Partners VII – A Buyout strategy private equity fund investing in American middle-market companies. Vestar has deep expertise and broad experience in identifying and supporting high-quality companies with strong growth potential. The manager demonstrates strong historical performance across a wide range of industries, including consumer, healthcare, and industrials.

New Mountain Capital VII – A private equity fund with a consistent strategic focus on BUYOUT. NMC VII focuses on growth investments and building businesses in non-cyclical growth sectors, with an emphasis on operational excellence and strategic development across a variety of middle-market companies in Europe. NMC has a strong and proven track record and is considered one of the leading managers in Europe and globally.

Coller Institutional Partners VIII – The flagship fund of Coller Capital’s flagship strategy. Coller Capital is considered the founder of the secondary strategy and one of the leading managers in the field. The fund focuses on acquiring existing interests in private equity funds, with the aim of providing liquidity to other investors. Coller Capital leverages its extensive network and deep industry knowledge to identify attractive opportunities and negotiate favorable terms. The fund aims to deliver attractive returns to its investors through a combination of acquiring assets at attractive prices and maintaining strong performance in underlying assets.

Coller Institutional Partners IX – CIP IX was established to continue the investment strategy and strong performance of funds 1–8. Coller Capital seeks to apply the same methodology that placed it in the top quartile of global secondary fund managers, with the goal of continuing to provide its investors with broad diversification across high-quality underlying assets with significant growth potential, industries, managers, and vintage years.

Clayton Dubilier & Rice XI – CD&R XI is a Buyout strategy private equity fund. The fund invests across four core sectors: consumer/retail, healthcare, industrials, and services. Investments will be made primarily in North America and Western Europe. Historically, CD&R ranks among the world’s leading private equity players with a strong track record and a focus on long-term partnerships in which the manager has driven value creation through operational improvements and strategic growth initiatives.

Why Choose VALUE for Private Equity Fund Advisory?

Private equity remains a vital component of the global financial system, offering significant opportunities for both investors and companies alike. By understanding the types of investments available, the requirements involved, and the investment process, investors can successfully participate in this asset class.

At VALUE we manage and provide access to some of the world’s leading private equity funds for qualified investors.