Transactional Funding

COMPANY

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The main benefit of our private equity firm is the ability to raise capital within the company to invest in our commercial loans, mergers or acquisitions, debt equity, equity participation, and venture capital. Private equity investment comes primarily from institutional investors and accredited investors, who can dedicate substantial sums of money for extended time periods. In most cases, considerably long holding periods are often required for private equity investments in order to ensure a turnaround for distressed companies or to enable liquidity events such as an initial public offering (IPO) or a sale to a public company.

Since the 1970s, the private equity market has increased enormously. Pools of funds are sometimes created by private equity firms in order to privatize extra-large companies. A significant number of private equity firms perform actions known as leveraged buyouts (LBOs). Through LBOs, substantial amounts of money are provided in order to finance large purchases. After this transaction, private equity firms attempt to improve the prospects, profits, and overall financial health of the company, with the ultimate goal being a resale of the company to a different firm or cashing out through an IPO.

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Retail Investors vs. Institutional Investors

Retail and institutional investors invest in bonds, options, futures contracts and stocks. However, because of the nature of the securities and/or the manner in which transactions occur, some markets are primarily for institutional investors rather than retail investors. Examples of such markets primarily for institutional investors include the swaps and forward markets. Retail investors pay brokerage firm fees along with marketing and distribution costs for each trade. In contrast, institutional investors send trades through to exchanges independently or through intermediaries; they negotiate a fee for each transaction and avoid paying marketing and distribution costs.

Retail investors buy and sell stocks in round lots of 100 shares or more; institutional investors buy and sell in block trades of 10,000 shares or more. Because of the larger trade volumes, institutional investors avoid buying stocks of smaller companies and acquiring a high percentage of company ownership. The investment cannot be sold when desired for little or no loss in value, and performing such an act may violate securities laws. For example, mutual funds, closed-end funds and exchange-traded funds (ETFs) registered as diversified funds are restricted as to the percentage of a company’s voting securities the funds can own. Conversely, retail investors find small companies’ lower stock prices attractive; they can invest more diversified portfolios in smaller price ranges than larger ones.

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