8 - What is private equity?

Capital development means that, through venture capital, a company can get a bank or investment fund to buy into its capital and participate in its growth. It gives the company financial security and an outside yet unobtrusive opinion on its decisions.

[Woman 1] You see that valley over there? 5 years ago, there was nothing there. Now it's a ski area spanning 10 communes. Ready?
[Woman 2] In a minute. I'm just admiring the landscape. So beautiful and so vast...:
[Woman 1] Well, we have private equity to thank for all of that. Okay, let's go!
[Woman 2] Hey, wait! Take it easy! What's the rush? Tell me more about this private equity business.
[Woman 1] You never mentioned you were such a seasoned athlete. Mont Blanc and all that.
[Woman 2] Sure! I'm interested in all that. So?
[Woman 1] So private equity is how companies not listed on the stock exchange can finance their growth.
[Woman 2] Why not just borrow money if they need funding?
[Woman 1] Okay, hold this. Through venture capital, a company can get a bank or investment fund to buy into its capital and participate in its growth. It gives the company financial security and an outside yet unobtrusive opinion on its decisions. The bank has experts in every sector, be it agriculture or services.
[Woman 2] What does the bank get out of it?
[Woman 1] On the one hand, the bank supports SME growth by advising SMEs on their business development and helping them create long-term value. On the other hand, if the company does well, the bank also stands to benefit financially as an investor. So, it's a win-win situation for both parties.
[Woman 2] The bank must have big stakes in a lot of companies, then.
[Woman 1] The bank is never a majority shareholder. Usually, it only has a 10 to 30% stake in a company's capital for an average of 7 years.
[Woman 2] How does the bank choose the companies it wants to invest in?
[Woman 1] Through the long-standing relationships that is has built with its clients in every strategic step of their development. When a company decides it wants to expand, it will work with the bank to establish the value of the company, how much can be invested in the company, and for how long. The bank is basically there to help the company get into the right track.
[Woman 2] Private equity. Not a bad idea! 
[Woman 1] And what if we go hit the slopes? Come on. Our legs are going to start cramping up any minute now.
[Woman 2] Oh, I never get cramps.
[Woman 1] No kidding!
[Woman 2] I'm serious! Never had one in my life!
[Woman 1] Let's go!