The top 30 private equity firms and the transaction strategies they employ

Private Equity Info has ranked the top 30 private equity firms worldwide to bring transparency to an otherwise rather opaque industry.

As a rule, private equity firms are classified strictly according to their fund size. However, due to the current economic climate, fund size may not be the most accurate measure of a company’s current activity and investment capacity. Private Equity Info has ranked the largest global private equity firms based on a more holistic view across a variety of metrics. Parameters include: fund size (of course), current readiness to invest, maximum transaction size the company will consider, and capital commitment. This ranking is therefore admittedly subjective.

TOP 30 PRIVATE EQUITY COMPANIES

1. Bain Capital

2. Texas Pacific Group

3. Apax Partners

4. Blackstone Group

5. Carlyle US Venture

6. Silver Lake Partners

7. Fortress Investment Group

8. Apollo Investment Corp.

9th International Advent

10. Kohlberg Kravis Roberts & Co.

11. BC Partners

12. CVC Capital Partners

13. Open Investments

14.Terra Firma Capital Partners

15. First Reserve Corp.

16. Providence Equity Partners

17. EQT Partners

18. American capital

19. Welsh, Carson, Anderson & Stowe

20. Permira

21. CCMP Capital

22. Goldman Sachs Capital Partners

23. Cinven

24. 3iUS

25. Warburg, Pincus & Co.

26. Hellman & Friedman

27. General Atlantic

28. GTCR Golder Rauner

29. Charterhouse Development Capital

30. PAI Partners

These leading private equity firms and others employ a variety of transactional strategies to acquire and grow profitable portfolio companies. The most common transaction strategies are acquisition capital, buyouts, consolidations, divestitures, ESOPs, growth capital, recapitalization, shareholder liquidity and turnarounds – are detailed below:

acquisition capital – Capital provided to operating companies to grow through acquisitions. This capital is typically allocated for a specific, identified acquisition target.

acquisitions – In a leveraged buyout (LBO) or management buyout (MBO), a private equity firm typically acquires a controlling interest (if not 100%) in an operating company and retains a controlling position.

Consolidations (Industry Roll-Ups) – Within fragmented industries, PE firms acquire multiple companies in order to consolidate them into a larger entity. Typically, the company first acquires the “platform” company and then acquires other, smaller companies as additional investments.

divestitures – Investing in a non-core division of a larger business unit. In this case, the joint-stock company spins off a business unit into a company.

ESOP – Employee stock ownership plans are mechanisms to transfer all or part of a company’s property to its employees. Sometimes PE firms bring in equity to fund this ownership transfer.

growth capital – refers to the equity investment by a PE firm specifically to facilitate certain growth initiatives.

recapitalization – a strategic change in a company’s capital structure, usually involving a partial transfer of ownership. A recapitalization often occurs when an owner wants to cash out a fractional interest in the company (the proverbial “take a few chips off the table”). In this case, a PE firm would provide the equity to pay the owner in exchange for a percentage of the ownership.

Shareholder Liquidity – similar to a recapitalization as it is a strategic change in the capital structure, but usually with a different intent. With this strategy, a PE firm provides the company with enough equity to fully “pay off” an owner, typically for family succession planning purposes.

turnarounds – PE firms can provide equity to turn a distressed or distressed company into a financially stable company. Companies in distress or special situations are often in arrears (ie bankruptcy) or about to do so.

Reprint Rights

(c) 2004-2009 PEI Services Ltd. All rights reserved.

You may reprint or distribute this article for free as long as you keep the links, content, and signature intact.