What does pe mean? English

Private equity investment is PE for short.

1 definition

Generalized private debt equity

Narrow sense private debt rights and interests

Project selection and feasibility verification

Legal investigation

Investment scheme design

Exit strategy

manage

Main characteristics of 2PE

3 the characteristics of private equity funds

Definition editing

Private equity investment (PE for short) is an investment behavior of raising funds in the form of private placement, investing in private enterprises, that is, unlisted enterprises, so as to promote the value growth of unlisted enterprises, and finally selling shares and withdrawing through listing, mergers and acquisitions, management buyback and equity replacement.

In structural design, PE generally involves two main bodies, one is the fund management company as the manager, and the other is the fund itself. Limited partnership is the most common form of private equity investment organization in the world. Under normal circumstances, fund investors, as limited partners (LP), do not participate in management and assume limited liability; As a general partner (GP), a fund management company invests a small amount of money, grasps various decisions such as management and investment, and assumes unlimited responsibilities.

Generalized private debt equity

In a broad sense, PE refers to the equity investment covering all stages before the initial public offering of an enterprise, that is, the investment made by the enterprise in each stage of seed stage, initial stage, development stage, expansion stage, maturity stage and Pre-IPO. Related capital can be divided into venture capital, development capital, buyout/buy fund, mezzanine capital and working capital according to the investment stage. Pre-IPO capital (such as bridge financing) and others, such as private investment of public equity (PIPE), differential debt of non-performing loans and real estate investment.

Narrow sense private debt rights and interests

In a narrow sense, PE mainly refers to the private equity investment part of mature enterprises that have formed a certain scale and generated stable cash flow, mainly refers to the private equity investment part in the later stage of venture capital, in which M&A funds and mezzanine capital account for the largest part of capital scale. In China, PE mainly refers to this kind of investment.

Project selection and feasibility verification

Due to the long investment cycle and low liquidity of private equity, investors usually put forward the following requirements for investment targets in order to control risks:

● High-quality management is particularly important for financial investors who do not participate in enterprise management.

● At least 2 to 3 years of business record, huge potential market and potential growth, and convincing development strategy planning. What investors care about is the "growth" of profits. High growth brings high returns, so we are particularly concerned about the development planning of enterprises.

● Requirements of industry and enterprise scale (such as sales volume). Investors pay attention to different industries and scales, and financial investors will examine the significance of an investment to their portfolio from the perspective of portfolio diversification risk. Most private equity investors will not invest in high-risk industries such as real estate and industries they don't understand.

● Requirements for valuation and expected return on investment. Because it is not so easy to withdraw from the open market, private equity investors demand a higher expected return on investment, at least higher than the return on investment of their listed companies in the same industry, and expect to obtain a "China risk premium" for their investments in emerging markets such as China. A return on investment of 25-30% is usually required.

● The possibility of listing after 3-7 years, which is the main exit mechanism.

Legal investigation

Investors should also conduct legal investigations to find out whether the enterprise is involved in disputes or lawsuits, whether the property rights of land and real estate are complete, and the duration of trademark patent rights. Many foreign-funded enterprises are emerging enterprises, and there are often some legal problems. Both parties will gradually clean up and solve these problems in the project inspection.

Investment scheme design

The investment scheme design includes corporate governance issues such as valuation and pricing, board seats, veto power, exit strategy, determination of contract terms list and submission to the Investment Committee for approval. Due to the different starting points, interests and tax considerations of investors and investors, differences often arise in the negotiation of valuation and contract terms list. Solving these differences requires high technical requirements, not only negotiation skills, but also the assistance of accountants and lawyers.

Exit strategy

Exit strategy is a factor that investors are very concerned about when they start to screen enterprises, including listing, selling, stock repurchase, selling options and so on. Among them, listing is the exit mode with the highest return on investment, and the income source of listing is the profits and capital gains of enterprises. Because the domestic stock market is small, the listing cycle is long and it is difficult, many foreign foundations register a company overseas to control the joint venture company, so as to list overseas with overseas registered companies as the main body in the future.

manage

Statistics show that only 20% of private equity investment projects can bring rich returns to investors, and the rest are either loss-making or flat. Therefore, investors generally don't invest all at once, but invest in stages, and each investment is based on the premise that the enterprise reaches the preset goal. Implementing active and effective supervision is a necessary means to reduce investment risk, but it requires the investment of human and financial resources and will increase the cost of investors. Therefore, different foundations decide the appropriate degree of supervision, including adopting effective reporting system and monitoring system, participating in major decisions and giving strategic guidance. Investors will also use their networks and channels to help joint ventures enter new markets, find strategic partners to exert synergies, reduce costs and increase profits in other ways. In addition, in order to meet the requirements of future public listing or international mergers and acquisitions of foreign-funded enterprises, investors will help them establish appropriate management systems and legal frameworks.

Main functions of 2PE editing

In a narrow sense, PE mainly refers to the private equity investment part of mature enterprises that have formed a certain scale and generated stable cash flow, mainly refers to the private equity investment part in the later stage of venture capital, in which M&A funds and mezzanine capital account for the largest part of capital scale. In China, PE mainly refers to this kind of investment.

1. In terms of fund raising, it is mainly raised by a few institutional investors or individuals by private placement, and its sales and redemption are carried out by the fund manager through private consultation with investors. In addition, the investment method is also carried out in the form of private placement, which rarely involves the operation of the open market and generally does not need to disclose the details of the transaction.

2. More equity investment is adopted, and debt investment is rarely involved. Therefore, PE investment institutions enjoy certain voting rights in the decision-making management of the invested enterprises. Reflected in investment instruments, common stock or transferable preferred stock and convertible bonds are commonly used.

3. Generally investing in private companies, that is, unlisted companies, and rarely investing in publicly issued companies, will not involve the obligation of tender offer.

4. It is more inclined to a molding enterprise that has formed a certain scale and generated stable cash flow, which is obviously different from VC.

5. The investment period is long, generally reaching 3 to 5 years or longer, which belongs to medium and long-term investment.

6. The liquidity is poor, and there is no ready-made market for the transferor of a non-listed company to directly reach a deal with the buyer.

7. There are many sources of funds, such as wealthy individuals, venture funds, leveraged M&A funds, strategic investors, pension funds and insurance companies.

8.PE investment institutions mostly adopt limited partnership system, which has good investment management efficiency and avoids the disadvantages of repeated taxation.

9. Diversification of investment exit channels, including IPO, transaction sale and merger and acquisition; A), the target company management repurchase, etc. [ 1]

3 private equity fund feature editor

The operation mode of private equity fund is equity investment, that is, through capital increase and share expansion or share transfer, the shares of unlisted companies are obtained, and profits are made through share value-added transfer.

Private equity funds have the following characteristics:

1. The channels for raising private funds are narrow. Private equity funds can only be raised in the form of private placement, that is, they cannot raise funds from specific objects. For example, the cumulative number of securities issued to a specific target should not exceed 200, but all the targets raised are institutions or individuals with strong financial strength and high quality of capital composition, which makes the funds raised no less than Public Offering of Fund in quality and quantity.

2. Flexible equity investment methods. In order to avoid the high risk of equity investment, the investment methods of private equity funds are more and more diversified. In addition to pure equity investment, there are disguised equity investment methods and portfolio investment methods with equity investment as the mainstay and creditor's rights investment as the supplement.

3. Equity investment is accompanied by high risks. Equity investment usually needs to go through several years of investment cycle, and because it is invested in developing or growing enterprises, the development risk of the invested enterprises themselves is very high. If the invested enterprise ends in bankruptcy, the private equity fund may lose all its money.

Development Status of China

At present, the development of private equity funds in China is still in its infancy. There are many problems that need to be studied: first, vigorously develop local private equity funds or accelerate the introduction of foreign capital. From the perspective of excess domestic liquidity and giving priority to sharing the fruits of economic growth, priority should be given to local funds. Overseas funds have more advantages than local funds in listing overseas, recruiting excellent managers, enterprise valuation technology and fund management experience. Of course, after the domestic multi-level market develops, the first advantage of overseas funds will no longer exist. The second is the relationship between the development of local private equity funds and the cultivation of manager market. A very important reason for the failure of private equity investment in the past is that the general manager of the enterprise is not satisfactory. The market of entrepreneurs and managers is closely related to the development of private equity funds in China. The third is the relationship between private equity funds and local governments. 201165438+February In order to standardize the operation and filing management of equity investment enterprises (including equity investment parent funds for equity investment enterprises) established in People's Republic of China (PRC), the General Office of the National Development and Reform Commission issued the Notice on Promoting the Standardized Development of Equity Investment Enterprises today.

Direct purchase mode of IPO brokers

Overseas private equity funds began to land in China capital market, and began to use the more advanced IPO brokerage direct purchase model. People's Daily Online, Xinhuanet and other central media made a brief report. Xinhuanet reported: "This new model refers to the mode of insurance broker agent and broker direct purchase. Its operating principle is: by sharing the satisfaction of equity investors with equity products, the investment market will be naturally stimulated, and more investors will be attracted to participate in the investment. The huge commissions originally paid to banks, funds, foreign exchange and other institutions will be returned to investors who continue to share their experience in equity investment according to a certain distribution method, so that investors can also participate in the huge profits of profit distribution in the promotion of equity products. "Most of these overseas private equity funds belong to new energy, rare minerals, e-commerce and other fields. , and are generally listed on the overseas second board, which brings considerable investment income to investors. China should improve relevant laws and regulations and effectively supervise this private equity raising model.