the secrets of underground medicine purchase

Private equity firms’ reputation for dramatically increasing the value of their investments has helped fuel this growth. Despite the private equity environment’s becoming more challenging amid rising interest rates and greater government scrutiny, that figure reached $501 billion in just the first half of 2007. Indeed, the global value of private equity buyouts bigger than $1 billion grew from $28 billion in 2000 to $502 billion in 2006, according to Dealogic, a firm that tracks acquisitions. In recent years, private equity firms have pocketed huge-and controversial-sums, while stalking ever larger acquisition targets. The very term continues to evoke admiration, envy, and-in the hearts of many public company CEOs-fear. But the greatest barrier may be public companies’ aversion to exiting a healthy business and their inability to see it the way private equity firms do-as the culmination of a successful transformation, not a strategic error. capital-gains taxes and a dearth of investment management skills. The latter would give companies an advantage over funds, which must liquidate within a preset time-potentially leaving money on the table.īoth options present public companies with challenges, including U.S. (After all, a public company wouldn’t deduct the 30% that funds take out of gross profits.) Corporations have two options: (1) to copy private equity’s model, as investment companies Wendel and Eurazeo have done with dramatic success, or (2) to take a flexible approach, holding businesses for as long as they can add value as owners.

Public companies that compete in this space can offer investors better returns than private equity firms do. A corporate acquirer, in contrast, will dilute its return by hanging on to the business after the growth in value tapers off. Once that gain has been realized, private equity firms sell for a maximum return. Private equity’s sweet spot is acquisitions that have been undermanaged or undervalued, where there’s a onetime opportunity to increase a business’s value. The chief advantage of buying to sell is simple but often overlooked, explain Barber and Goold, directors of the Ashridge Strategic Management Centre. But the fundamental reason for private equity’s success is the strategy of buying to sell-one rarely employed by public companies, which, in pursuit of synergies, usually buy to keep.

Typically, these returns are attributed to the firms’ aggressive use of debt, concentration on cash flow and margins, freedom from public company regulations, and hefty incentives for operating managers. The huge sums that private equity firms make on their investments evoke admiration and envy.

The secrets of underground medicine purchase