Equity capital sources
Understand how private equity firms, family offices and individual investors can differ in capital, involvement and investment priorities.
Overview
Private equity firms, family offices and high net worth individuals can all provide equity, but they often differ in where their capital comes from, how they expect to realize value, and how involved they become.
The guide compares general characteristics of each type. These categories are generalizations, not guarantees: the specific investor's mandate and terms matter more than the label.
Three takeaways
- Private equity firms invest capital contributed by limited partners to a fund, commonly seek majority ownership or control, and often provide board participation and operating support. Exit timing can be influenced by the remaining fund term.
- Family offices invest their own capital, may invest as minority or majority owners, and vary in involvement. Many take a passive role but may become more involved when the business needs support.
- High net worth individuals invest their own capital, are typically minority investors, and their involvement and priorities depend on the individual.
Considerations
- Time horizons differ by investor, strategy and transaction. Ask each investor about its own holding expectations and what would drive an exit.
- Understand the decision process: who approves an investment, and what remains before a commitment is binding.
- Clarify governance expectations, including board seats, consent rights and the level of involvement in management.
- Discuss liquidity preferences, such as reliance on distributions, an eventual sale or other exit routes.
Characteristics and time horizons are illustrative and vary by investor, strategy and transaction. They are not commitments or guarantees.
For information only. This material is not an offer or solicitation, or legal, tax or investment advice. Structures and terms depend on the business, counterparties and definitive documentation.