When economic news sources such as CNN money, the Wall Street Journal, or other such financial publications talk about private equity, they are speaking of equity securities of companies that are not traded publicly on an exchange or stock market.

When a firm like Apollo Management invests into a private equity, it is for one of two purposes. The first is to raise capital for what they believe is a company that can improve its operations and become profitable. These capital investments can prove positive, yet private equity investments usually seek the acquisition of the assets. Once acquired, they can manage the operations and possible sale of properties.

Common terms used in reference to private equity are leveraged buyout, venture capital, growth capital, mezzanine capital, and distressed securities. The most attractive assets are mature companies with established history in the market as opposed to new or young businesses.

Distressed securities are securities of companies and governments that are already in default, are in bankruptcy protection, or are soon to become in these conditions. These securities purchases can be structured in “loan-to own” or “turnaround” strategies depending on the financial needs of the company and the risk of the investment.

Whether it is in the interest of restructuring the debt, narrowing the focus of the company, or implementing new operational plans, investing new capital in the form of equity has proven to be an a productive and active market for the United States and Europe.

The past five years in the market has witnessed a buyout boom. With largest buyout records being set time and again, Apollo was one of the most successful, aggressive and active leveraged buyout firms. The following is a list of some of their most notable and productive investments:

Harrah’s Entertainment: A heavyweight in casino gambling and hotels.

Norwegian Cruise Lines: A popular and prominent cruise line company.

Realogy: Apollo leveraged a buyout of a top franchisor of Caldwell Banker 21st Century and Sotheby’s International Realty.

Claire’s Stores: Retailer of fashionable costume jewelry.

In addition to individual companies, Apollo Management acquired other the assets of other private equity firms.

Founded in 1990 by renowned investors Drexel Lambert and Leon Black, Apollo Management is a private equity firm. They specialize in common leveraged buyout transactions and the purchasing of distressed securities.

The financial records of AM in 2008 indicate management over of $37 billion of investor commitments, which makes it one of the largest private equity firms worldwide.

With headquarters in New York, the firms investments are two tiered in private equity and capital markets. However, the capital markets strategy is used only to compliment the private equity core of operations.

Advice for investing in private equity with this firm is always provided with necessary caution. By their very nature, investments are risks. It is always encouraged to diversity investments so as to not put all of the eggs in one basket.

However, the unrivaled growth of Apollo management over the past decade can demonstrate, trusting money with this firm has made several multi-millionaires out of ordinary professionals. Relax and watch your money grow.

The Carlyle group is a private equity investing company. This group has been in business several years. It is based in Washington, D.C. and is considered to be the largest private equity company in the U.S. It is a company that has many global offices, in North America, Australia and Europe, and Asia.

The firm has been in operation since 1987 at which time it was established to be a global management group involved in leveraged buyouts, and investor relations. It has increased in structure and size since then, and is

now the largest private equity firm in the world.

l The Carlyle controls more than 90 million dollars thus making it a major player in the business world. The Carlyle group offers a number of services to it’s investors. Number one is the amount of capital they have available. In the words of their web page: “The Carlyle group structures and acts as the lead manager in structured equity sellouts and management buyouts.” It is involved in the execution and monitoring of private investments.

The assets of this firm are around 90 million dollars and it’s wealth is increasing constantly as it continues to obtain various funding sources from around the globe. This group has recently been involved in the takeover of a large corporation. The last major headline from the Carlyle group is their recent acquisition of the Stanfield AUM increasing their total lending AUM to about 11 billion dollars.

This firm is committed to total openness in regard to it’s investors. It is a company that has the wherewithal to be able to work with different investors regardless of their financial situation. The Carlyle group has a very high regard within the financial world ,and a reputation to protect, so individual investors should feel comfortable dealing with a firm of this magnitude.

The Carlyle group is an agency that is often in the news, due to their strategic take overs and corporate intricacies.This group is well deserved of the title of the world’s largest private equity firm, with it’s many offices in the U.S. and overseas.

Individuals who invest with this company have to realize that they may not get the individual attention that investors with other firms may be party to, simply since the size of the company may prevent a large amount of attention to small companies or small businesses.

Companies who may need the support of a large private equity firm would probably have a good choice with the Carlyle group, but those who prefer more individualized attention might want the services of a company that can devote more time to an individual investors concerns. The Carlyle group has media reports via an RSS feed if individuals are interested in the company.

The Carlyle group has undergone some criticism by those who feel that the group is linked to other giant conglomerates like Halliburton that does not have the best reputation. Most of the detractors seem to have an axe to grind. It seems that for the most part the Carlyle group would be a safe company to do business with.

As part of a well diversified portfolio, private equity has proven quite fruitful for investors over the past decade with several firms experiencing exponential growth in asset management. But, prior to rushing to get involved, it is important to know more about Goldman Sachs Capital Partners and private equity.

What is Goldman Sachs Capital Partners?

As a division of the financial institution Goldman Sachs, Capital Partners focuses primarily on leveraged buyouts and growth capital investments on a global scale. The firm is headquartered in the heart of the financial center of New York City.

Since this division began operating, their financial records show over $40 billion dollars in raised funding with half invested and spread across several different funds.

Although slow to commit at first, Goldman Sachs became a prominent player in private equity investments through the 90’s and has built a powerhouse over the past decade.

Understanding Private Equity

The term Private Equity is used to describe securities that are only offered to investment institutions and not to the general public vis-à-vis an exchange like a stock market.

Professionals in finance commonly use the terms leveraged buyout, growth capital, and distressed securities when discussing or reporting on this area of investment.

In this opportunity, financial institutions raise investment capital from interested parties and use the funds to acquire, control, or otherwise manipulate the progress of the company.

It is important to note that while private equity investments are high risk, the value of investing with Goldman Sachs Capital Partners is their principle of only seeking opportunity with well-established companies with valuable hard assets and a proven record of cash flows.

Leveraged Buyout Explained

When an investment firm recognizes an opportunity for a private equity acquisition, there are several ways in which they can work out the deal that is advantages for the individual investor and the company at hand.

An across the board buyout would mean that Goldman Sachs takes full control of operations and assets of a company.

A leveraged buyout however provides GS simply with controlling interest. With controlling interest, they are able to restructure the corporate operations of the company and assist the company in reaching revenue targets.

Altogether a separate strategy, Growth Capital is used as a sort of bailout for companies struggling to raise the capital necessary to invest in new products or new markets. In most cases, Goldman Sachs Capital Partners do not take majority control of a company, but rather influences decisions and provide significant incentives for the company’s turnaround.

Notable Leveraged Buyouts

Just in the past ten years, Goldman Sachs Capital Partners have acquired controlling interest in a number of recognizable brands.

Burger King 2002: When Burger King failed to reach certain financial performance targets, Goldman Sachs restructured the company and renewed prospects for profitability.

Alltell Wireless 2007: Alltel was struggling in the red when GS Capital Partners leveraged a buyout. They sold Alltel to Verizon for a considerable gain.

SunGard 2002: As perhaps one of the largest leveraged buyout acquisitions in history, private equity investors with Goldman Sachs have taken advantage of a reinvigorated dot.com market.

TXU 2007: In one of its most admired leveraged buyouts amongst finance professionals, Goldman Sachs Capital Partners acquired this regulated and energy producing utility.

This company has grown into a multi billion dollar franchise and has spread not only in the United Stated but to the Foreign countries as well. There are a few locations in the U.S. Kohlberg Kravis Roberts & Co. can be found in New York, New York. Also, in Menlo and San Francisco, California.

They have a office in Houston, Texas as well as Washington, DC. KKR can be found in these parts of the U.S. Outside of the U.S you can locate KKR in London. Also, there are branches in Hong Kong, Tokyo, Beijing, Mumbai, Dubai, Seoul and Australia. From its birth this company has stretch to many different corners of the world and is continuing to grow.

Just recently Kohlberg Kravis Robert & Co sealed a deal with Japan. This is only the second investment that KKR has made with Japan since their birth. In this deal Intelligence Ltd, a cable broadcaster was purchased buy KKR for a total of three hundred and fifty seven million dollars. This marked the first time a big deal was ever made by this organization in Japan. Another major topic that hit the headlines also occurred recently when KKR cancelled a five hundred million dollar share seal.

Now it has notice a huge twenty-nine percent drop in the economic net income and immediately withdrew. They felt that it was unfavorable marketing conditions and refused to take the risk. KKR has dropped six percent since it began trading in New York.

This company came a very long way from its small start back in 1979. Some of the world’s biggest buyout deals occurred with the full participation of Kohlberg Kravis Roberts & Co. For example, TXU Corp which is a large energy producing industry was bought out by KKR for a sum of 43.2 billion dollars and they also took on its assumed debt.

In the last few years, private equity has become more global and increased in scale. It is now greatly accepted by both European and Asian economies. One of the main reasons KKR was able to invest in foreign countries is due to a major increase in financial flows, the international trade has grown and because of higher living standards being brought on because of shrinking technology breakthroughs.

Private equity can be summed up into two words, Public Benefits. Individuals supported by pension funds are key beneficiaries in their investments. KKR seeks to work closely, as partners with the management of the companies they invest in and stay highly involved in their businesses. In doing this, the company’s that they have invested in has become competitive franchises worldwide. Also, because of this, a large number of jobs in those companies have become available.

In the last three decades Kohlberg Kravis Robert & Co. put forth great effort in building their company. They are and have become a positive influence on all of the companies that they invest in. Now, many people that never knew what buyout ment have become very knowledgeable on it and more and more people are seeking to be apart of it.

As an investment strategy, it is important to allocate available funds across the risk spectrum. This will allow for a medium level of overall risk and closer monitoring of the higher end of the spectrum. While private equity is perceived as having the greatest risk, this may not always be true. Since private equity is the most flexible, it can be structured in many different forms including being secured by assets not fully secured by debt.

This is an advantage private equity can have compared to stocks or mutual funds which are unsecured investments in publicly traded companies. Private equity may also have this advantage against other unsecured instruments including bonds or hedge funds. Hedge funds have no security unless an investor hedges both sides of an anticipated future result in what is called a ‘straddle.’

By the same token, private equity can be totally unsecured similar to stocks or mutual funds. Typically, the unsecured investments create an expectation of higher return. This is demonstrated by debt on the low end which usually has a fixed rate of return associated with repayment of the debt. Bonds on the other hand, are a negotiable debt instrument that is usually unsecured but must be repaid by the company before investment instruments. As a result, on average, bonds will generate a return greater than debt but less than investments like private equity, stocks, or mutual funds.

Another comparison is the relationship between macro and micro economics. All investment and debt instruments are affected by macroeconomics but some instruments, such as private equity, stocks, bonds and debt are primarily geared toward a specific company and its particular economic health.

The wide variety of mutual funds and hedge funds can act like a rheostat between micro and macro depending on the size of the pool of companies in the fund. The expected return is usually an inverse relationship to the number of individual entities in the fund and the larger the fund, the lower the expected return.

The level of participation relative to the total investment plays a role in expected return. Most of the time private equity plays a major role in the financing of an entity at the time the investment is made. This high level of investment usually induces a structured expectation of high return along with a profitable exit strategy such as an IPO within a specified time frame. This particular scenario is unique to private equity.

Calculating the exposure to loss will be a factor in determining the expected return on investment by the different instruments. Secured debt can ultimately sell the assets to minimize losses.

Positions in stocks and mutual funds can incur a total loss but are completely negotiable in the marketplace, allowing the investor to reduce the loss by selling at a lower price. Hedge funds typically limit the loss to that incurred within a certain time frame but they can still be substantial.

Losses resulting from private equity investments will depend on the structure of the investment. It can be anything from a total loss to whatever recovery is possible through the sale of assets.

Finally, private equity investment almost always means significantly greater participation by the investing firm than expected in other types of investments. Private equity firms will be intimately involved in strategic and tactical operational decisions in an effort to protect the investment and propel it toward the goals that have been established.

What are private equity investments? These types of companies will not be found in the public trading section of the newspaper. These companies employ a different strategy, and require large firms to support the investment. This investment takes a massive amount of funds to accomplish, because it takes money to help large companies or buy them out. This investment is common for large companies; they will add strength to the company’s balance sheet by making acquisitions and creating new technologies.

Types of private equity investments strategies? The most popular investment strategies are leveraged buyout, venture capital, growth capital, distressed and special situations, and mezzanine capital.

Leveraged buyout: This investment uses financial leverage to acquire a company from the shareholders. These types of companies maintain positive cash flow. There is usually some financial sponsor overseeing this transaction, and with the enormous profits that can be made, it has to be monitored.

Ventured capital: This investment deals with companies in the start-up phase. This can be an advantage for investing companies, because if the project succeeds, not only will they benefit from their investment, they can also look into a leveraged buyout.

Growth capital: This investment deals with mature companies wanting to expand, enter into new markets, and acquisitions. This investment can be risky, because of the “unknown factor.” No matter how much research companies provided, they cannot guarantee the success of entering a new market or acquiring a smaller company.

Distressed and special situations: This investment deals with the rescuing of financially challenged companies. This can be done by buying up the debt and taking control of the company’s equity. There is a substantial risk with this investment, because the company is probably going down and needs to be saved.

Mezzanine Capital: This investment benefits the smaller companies, because larger companies will loan larger amounts of funds than the banks will. This adds financial leverage to the smaller companies.

What are some risk and rewards? There is always going to be risk when investing; that is the nature of the beast. The rewards for these investments can be substantial; however, depending on the investment, there could be a serious risk. For example, leverage buyout can turn into a complete failure if the debt causes a bad quarter; this could turn this investment into a financial nightmare. All the investments have their risks, but the rewards outweigh the risk involved, and that is why large companies invest in private equity.

How to choose a private equity firm? There are a handful of firms out there that will invest in small and large companies, and what they look for is a complete business plan. They need to make money within five years, or it will not be accepted. When deciding on a firm, each company has to look at their structure, and what they are planning to do.

If they are going after another company, they need to choose a firm with the capital, and knowledge for the company to do this investment. This will be the same for any other investment, just make sure the firm has the funds and qualifications. They are going to require this from all the company’s, so make sure their right for the investment.

These types of investments are for the “big guys,” and it takes firms or large companies to be able to invest like this. The potential payout is monumental, but the risk can be devastating if there is any mistakes made.

Four common strategies include the following: leveraged buyouts, venture capital, growth capital, and secondary investments. Private equity investments include four additional, but riskier, adjacent markets: real estate, infrastructure, energy and power, and merchant banking. Two major companies employ these investment strategies: Goldman Sachs Capital Partners and The Carlyle Group.

In a leveraged buyout, private equity, as a financial asset, is used in a business transaction to acquire the assets from the shareholders of the company. A financial sponsor agrees to the acquisition, but doesn’t advance the required capital to fund the acquisition. Instead, the financial sponsor raises debt for the acquisition. The debt used to finance the transaction is predicated on several key factors: the financial state of the acquiring company; the lender’s willingness to grant credit to the financial sponsor for the company to be acquired; and the interest expenses of the debt.

In a venture capital transaction, private equity financing is used to provide capital to new and innovative technology companies to fund development. Capital is afforded to companies that lack long-term management experience and that also lack the funding to cover operating expenses. Financing is typically structured to be distributed in development stages. For example, funding may be distributed for start-up business expenses until the new company generates revenue. Another stage of funding might be distributed after the company demonstrates an ability to show profit.

In a growth capital transaction, companies use private equity to invest capital into businesses that need funding for long-term growth planning. A growth planning program might require investment funds to expand operations globally, to acquire like businesses, to compete in new markets, and to restructure the corporate system internally. In this type of transaction, the owner of the company sells a share of the business in order to generate cash for subsequent financing ventures; reduces debt on the balance sheet; and retains majority ownership.

In addition to the most common forms, private equity investors employ riskier strategies such as targeting real estate as an asset to fund leveraged buyouts. They also invest in bridges, transportation, and public works projects; energy production; distribution and sale of power; and merchant banking negotiated investment instruments. Private equity companies also invest in existing assets called secondary investments. Investment companies may exercise one or two options: sell their interests in private equity funds and/or purchase the investments from existing investors.

Goldman Sachs is a private equity firm. It functions as the investment agent of Goldman Sachs. It provides leveraged buyout and growth capital investments. Financial and business transactions range from approximately $200 million to under $800 million. It offers a unique private equity product: the Goldman Sachs Asset Management (GSAM). The GSAM is an investment solution that helps institutions, companies, and individuals manage risk.

The Carlyle Group is also a private equity firm with a global presence within seventy-one countries. As an investment firm, it manages approximately $80 billion of equity capital and it also focuses on leveraged buyouts and growth capital within the following industries: energy, health care, technology, transportation, and telecommunications.

The Carlyle Group focuses most of its investment strategies in the United States and Europe. Current portfolio investment holdings include an equity share in Dunkin’ Donuts, Hertz rental car company, United Defense Industries, Synagro Technologies, Inc, and Insight Communications.

The company focuses on a unique investment approach through its real estate division, Carlyle Realty Partners. Through the division, The Carlyle Group invests within office, retail, and industrial markets. They target “undervalued properties” in United States markets and real estate divestitures in European sectors. European markets include France and Germany. Carlyle Asia Real Estate Partners acquires properties in Japan and other major Asian countries.

Private Equity Defined

As an asset class to itself, private equity if the equity securities of companies that do not sell stock publicly in stock market exchanges such as the New York Stock Exchange (NYSE) or NASDAQ.

To be true, the company in question is an operational business. However, it’s either are already in default on business loans and other obligations, it may already be protected by bankruptcy, or they are quickly entering the red and are in need capital or outright buyout.

Understanding private equity: pros and cons, begins by knowing institutional investor firms are the primary purchasers. Next, it is important to comprehend the different forms of private equity acquisitions.

A leveraged buyout

Often, companies are not completely bought out. In fact, the best private equity acquisitions are established businesses with a well documented history in the marketplace.

Therefore, many companies that are entering financially difficult times merely require capital to become profitable once again. A leveraged buyout allows the business to remain operational; however controlling interest is acquired by the private equity firm in order to safeguard the risk with hard assets.

Growth Capital

In many cases, a mature company with a history of stable and recurring cash flows simply requires capital in order to grow the business into new markets. The capital could be used for product development which may require new technologies.

With growth capital, the private equity firm does not acquire controlling interest in the operations of the business. Yet, contracts typically include timeframes for profitability. Should the company not meet expectations, the private equity firm protects the investment with secured assets.

Distressed Securities

Equity securities with the greatest risk may also yield the greatest profits and dividends for investors. In the end, the best private equity firms over the past decade make the difficult choice of determining a company to not be profitable without extraordinary measures.

These forms of securities are called distressed. In these special situations, the investment firm has the final say in the direction of the company. Sometimes referred to as Distressed-to-control or loan-to-own strategies, these investments seek gain controlling interest of a company requiring corporate level restructuring.

Also common with distressed securities is rescue financing and turnaround strategies. However, the capital is leveraged against control of the company to reduce the risk of the investment.

Private Equity: Pros and Cons of Investing

In strictly real terms, private equity is an investment and therefore a risk. Even when the firm gains controlling interest in the assets and operations of a company, there is no certainty and no guarantee.

The Pro’s are as follows:

Private Equity investments have made real people millions of dollars in the past five years.

As part of a well diversified portfolio, any investment is worthy.

Investors could find themselves at the helm of a corporation.

The Cons are as follows:

Private Equity is a high risk investment. Money may be lost.

This type of investment is usually reserved for wealthy investors.

This investment could take years materialize.

TGP capital is a company that has been in business for several years. They have an extremely experienced managerial staff. The President of this company has over 40 years of experience in the banking and financial trade industries. There is also an extremely experienced team of investment professionals working with him, to insure that the particular needs of a company are well represented.

This firm is located in Kansas City, Missouri. It is one of Middle America’s prime financial institutions, and one that understands the needs of American businesses, through their long history of service to the private sector.

Some of the advantages to using private equity in business, for individual corporate and small business owners are that these companies will often fix companies that may be facing economic issues. They can grow them and sell them, thus increasing the capital available for both the company, and the money available to loan out. They have an advantage over publicly held companies in that their money is privately managed.

TGP Capital has assets of over 56.5 million dollars. It is a valued corporate enterprise, and one that will quite conceivably be around for years to come, due to the strength of the company.

TGP Capital made headlines in February 2010 when it added the addition of George L. Hansen to the firm. He was the former President of Carstar. He was a positive addition to the TGP team, and one who brought a further breadth of experience to this already diverse and established group of individuals. This company had a recent increase in second quarter profits on the New York Stock Exchange. It is a solid performer on Wall Street.

Those who are wishing to invest with this firm should contact the partners via their website. Companies that have a solid track record, are those that TGP is the most interested in. They may help by offering some capital that can be reinvested in the business and turned to profit.

The goal at TGP is to support managerial teams that are working with the company, not to replace them. Agencies that have a solid record of success, do not need another company to come in and to try to “reinvent the wheel.”

It is best to obtain private equity from a firm that has a solid track record, and with those who have a great deal of experience in the financial industry. This company currently outperforms many that are in the private equity business and can certainly help businesses reach a more solid financial footing. One can schedule a meeting with the principals if further equity is going to be needed in the corporate venture.

Companies would do well with a private equity firm particularly one as established as TGP. This company is profitable and one to be trusted with hard earned capital. They have a record of success, and have a group of individuals who thoroughly understand the market, and will work their hardest to get the most profits for your particular enterprise. Those in need of a private equity company should contact TGP.

This private investment is best described as a group of people that have pooled their assets together. They offer that capital to new and existing business. This can be advantageous for those that cannot get a bank loan. Maybe a new business is considered risky by the traditional bank but would be considered an opportunity by the investment banker group. Sometimes the trade off will be an additional cost but the end will justify the means.

Venture capitalists and private equity have played an immense role in the development of new businesses. Without their timely investments many businesses today would not exist. For instance, computer security breaches have continued to rise. Many new companies are meeting this challenge because of the millions provided by investment bankers in the form of private equity loans. American industry would not be able to respond as quickly to needs such as this without the help of private equity loans and the venture capitalist.

The role of an investment banker and private equity does not stop with the development of new business. Leveraged-buyouts of existing companies are also the role of a venture capitalist. Many companies and jobs have been saved as a result of leverage buyouts. So don’t believe the bad press. The repackaging plan is one example of this. A public company is purchased, reorganized, and then returned to the marketplace.

In the process of repackaging a company many jobs are saved and new growth is realized. Next is the portfolio plan. The portfolio plan usually benefits everyone. In this case the company will use private equity to purchase one of its competitors that may be in trouble. This increases the new company’s overall value. Most of the employees in the new company are retained and shareholders receive a good return on their investment. In some cases the business can be saved from closing its doors.

We are also beginning to see private equity stepping in to save the American banking system. The Seattle Times reported Sterling Financial raised enough money from private equity to prevent Washington’s second-largest bank from being seized and sold. A team of 30 investors agreed to put up almost 400 million in private investment using stock for collateral. This deal has saved the bank from closing its doors and salvaged countless jobs throughout the state of Washington.

In fact, the role of private equity can be seen everywhere. Private equity bankers have also invested in Hollywood. Your favorite movie was probably made possible with financing from private equity. Many medical miracles and technologies are also financed by private equity. Water filtration methods for consumer and medical applications along with on-site drug testing and various other inventions are available today because of private equity.

There are several other types of equity financing. Some of them are bootstrap funding, management buyout, divisional buyout. Bootstrap funding can be as simple as using a credit card to supplement funding needs. The management buyout removes the upper echelon of company whereas a divisional buyout will only purchase sections or divisions of a company.

It is clear to see that private equity plays a huge roll in the development of new business and the expansion of existing business in America. This makes the investment banker an unsung American hero.