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Investment Banks, Hedge Funds, and Private Equity, 2nd Edition by David Stowell

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16

Overview of Private Equity

Private equity can be broadly defined to include the following four different forms of investment:

1. Leveraged buyout (LBO) refers to the purchase of all or most of a company or a business unit by using equity from a small group of investors in combination with a significant amount of debt. The targets of LBOs are typically mature companies that generate strong operating cash flow.

2. Growth capital typically refers to minority equity investments in mature companies that need capital to expand or restructure operations, finance an acquisition, or enter a new market, without a change of control of the company.

3. Mezzanine capital refers to an investment in subordinated debt or preferred stock of a company, without ...

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