What is Private Equity?
‘Beteiligungskapital’ in German. It denotes equity financing that is usually made available by unlisted companies to buy or develop a company.
What advantages does a private equity investor bring to the company?
A lot more than purely proprietary capital. We do not just provide finance but participatively reorganise the respective company. In order to do that, we invest time, knowhow and management to create added value. We also prefer to call Private Equity corporate or intelligent capital.
Who invests in Private Equity?
Mostly institutional investors. Like pension funds, insurance companies, banks, large corporates or wealthy individuals. The investors for palero are European institutional investors and family offices.
What do Private Equity companies do?
They are not operationally active themselves. They invest their capital in companies from different segments. They select them on certain criteria. After concluding a transaction successfully they provide the portfolio company with management knowhow or fresh capital for further investments. We on the contrary are very operation oriented. Participation is our driving force.
How is the Private Equity acquisition process carried out?
Private Equity companies usually come to know about new investment options through various channels (M&A consultants, auditing institutes, private network etc.) Due diligence is the key factor. Potential target companies are put to the acid test to ascertain the chances of development and identify possible risks as early as possible. The findings of this investigation and the management’s business plan form the basis for future negotiations on the holding.
How are portfolio companies serviced?
Actively. It means that they are constantly included in strategic decisions. This enables the portfolio company to rely on the investor’s knowhow, management capacities, experience and network in order to tap the potential to its fullest. At palero capital one partner always joins the existing directors of the new portfolio company as an additional director.
How is the holding sold again? (Exit)
We constitute a partner for limited period. Usually we invest for five years in a company and are therefore interested in a long term, sustainable appreciation of value. For, we can claim success only if we have succeeded in increasing the value of the company and safeguarding its stability. That being the case the portfolio company is then sold. There are different “exit” options:
- Sale to a strategic investor (Trade sale)
- Sale to the Management (Management buy-in)
- Sale to another financial investor (Secondary Sale)
Usually companies financed by private equity not only have a better equity base but also a higher revenue growth. This has been proved, for instance, in studies undertaken by BVK (German Private Equity and Venture Capital Association) and PWC.
Does Private Equity create or destroy jobs?
In principle, Private Equity has a positive impact on employment. That has been proved by a number of studies like those of BVK (German Private Equity and Venture Capital Association) and PWC.
What does “Turnaround Financing” mean?
This for a company is a means to overcome operational hurdles (for e.g. sales issues) and make a positive recovery.
What is a “Carve-Out”?
When a company or a part of the company breaks away from its group. Important functions of a company earlier manifest in the group then often need to be reconstituted.
What is an “Asset Deal”?
Under this deal the buyer does not acquire a company’s shares (shares of a limited liability company and shares of a joint stock company) but the important assets of the company. Like fixed asset as in machines, current assets, like receivable due from customers and also all contracts (employee contracts, customer contracts etc.). The buyer, as it were, also normally assumes important liabilities like pension obligations, bank debts and other liabilities of the company.
Where does the name palero come from?
palero is a made up word, inspired from the Palermo district (Soho) in Buenos Aires, Argentina. According to the newspaper ZEIT “Buenos Aires is for the noughties what Berlin was for the nineties.” Virtually unrivalled for creativity, its kaleidoscopic and friendly vibe, this melting pot of cultures has become the most fascinating and thriving quarter of South America. A turnaround of a special sort.