Back to Basics – Exploring the World of Private Equity
Author: Bobby Dormanesh
Private equity is a type of investment in which a private equity firm raises money from investors, typically institutional and accredited investors, to purchase ownership stakes in privately held companies. The goal of private equity firms is to buy companies, improve their operations, and then sell them for a profit.
The private equity industry includes a wide range and flavor of firms, from large, global firms with billions of dollars under management to smaller, niche firms that focus on specific industries or geographies. These firms may also specialize in different types of private equity investments, such as venture capital, buyout, or growth equity.
The private equity industry plays a significant role in the global economy, as private equity firms often invest in companies that are in need of capital or operational improvement. This can lead to the creation of jobs and economic growth, as well as the development of new products and services.
A large portion of value creation comes from the synergies achieved by connecting multiple portfolio companies in the same or similar industry. For example, multiple manufacturing companies can be combined, resulting in cost savings from economies of scale. Synergies can also be achieved through the sharing of resources, such as technology, human capital, and supply chains. By pooling these resources, the private equity firm can improve the efficiency and effectiveness of the portfolio companies’ operation, leading to cost savings and improved profitability.
How we can help:
CLA has a team of industry specialized individuals that can help you the entire private equity cycle. Our fund services team is ready to assist your back office so that you can focus on your next target, while our transaction advisory team is ready to help you throughout your due diligence process on both the front and back end of the cycle.
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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