Private equity covers the activities of investing in the capital of companies that are not listed on the stock exchange. Investors can participate as either majority or minority shareholders. Private equity includes different branches:
- Innovation capital, also known as venture capital, invests in in very young companies (start-ups) to support the development of a new product or service;
- Development capital supports the development of more mature companies;
- Transmission capital involves the reorganization of a company’s capital base (for example, when a founder sells a stake to an investor through an LBO);
- Turnaround capital supports companies in temporary difficulty which need to be restructured.
To this list, we can now add infrastructure capital, which includes investment in projects (in the form of SPVs) or in companies that provide infrastructure.
Private equity players are mainly management companies that raise funds from institutional investors (pension funds, insurers, thrifts, credit unions, sovereign wealth funds) and then invest the money raised into companies. The market also includes other players such as business angels (who are involved in the first rounds of financing for start-ups), corporate venture funds, and public or private bank funds that invest their institutions' own funds.