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Private Equity: Sources And Uses

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  • Travis Bradford
  • Roy C. Smith

Abstract

Private equity capital is playing a large and growing role in the funding of small to medium‐sized, high‐growth businesses. Today's private equity investment typically takes the form of purchase of a minority interest in a post‐start‐up, high‐technology company followed by an IPO a few years later. A large number of such investors are scouring the markets for new investment possibilities and the competitive pressures are growing. Although private equity investors can and often do add significant value to a company, private equity is potentially expensive, in terms of both loss of ownership and loss of control over long‐term strategic decisions of the company. Owner‐managers who want to retain as much of both as possible are advised to install more formalized business procedures, expand the company's outside relationships, and become more familiar with the company's financial needs and options. These changes should reduce capital needs, reduce the costs of private equity funding, and increase negotiating leverage when dealing with large, sophisticated private capital investors.

Suggested Citation

  • Travis Bradford & Roy C. Smith, 1997. "Private Equity: Sources And Uses," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(1), pages 89-97, March.
  • Handle: RePEc:bla:jacrfn:v:10:y:1997:i:1:p:89-97
    DOI: 10.1111/j.1745-6622.1997.tb00129.x
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    Cited by:

    1. Elisabete Gomes Santana Félix & Cesaltina Maria Pacheco Pires, 2009. "Uma Análise do Mercado de Capital de Risco Português: Saídas Parciais Versus Saídas Totais," CEFAGE-UE Working Papers 2009_05, University of Evora, CEFAGE-UE (Portugal).
    2. Elisabete Gomes Santana Félix & José Paulo Esperança & Mohamed Azzim Gulamhussen & Cesaltina Pacheco Pires, 2009. "An analysis of the Portuguese venture capital market: partial exits versus total exits," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(3), pages 239-258.
    3. Capasso, Arturo & Faraci, Rosario & Picone, Pasquale Massimo, 2014. "Equity-worthiness and equity-willingness: Key factors in private equity deals," Business Horizons, Elsevier, vol. 57(5), pages 637-645.

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