Private Equity Fund Raising Deals

Private Equity

Contrary to real estate, in which investors buy homes and commercial properties, which they then sell for a profit in the next few years private equity invests capital in large companies. This could lead to an increase in the investment limit as the profits of the business are distributed among the investors who invested into that fund. Private equity firms earn an enormous amount of money from fund management fees as well as carried interest and an amount of the deal’s returns.

As new managers enter the market, they will face an uphill task of raising a full fund. LPs are apprehensive about their performance and have reduced their allocations. The success of fundraising is dependent on planning and preparation. Fundraising is a cyclical game and GPs should have clear paths to reach their goals of committed capital prior to embarking to the market. They should also be clear on the sweeteners they’re prepared to offer–scale discounts and first-mover, or so-called early bird benefits, etc.

It doesn’t matter if the fund is an investment vehicle for the first time or a buyout fund many PE firms use placement agents to help them connect with LPs and promote their funds. These professionals receive an amount based on a bargained amount that is raised by the fund. In this way, it is important for GPs to assess their investor relations team’s internal capabilities before enlisting help of an agent to place the fund.