One of my biggest financial eye-openers was realizing the potential of private equity as both an investment and a management strategy. It's fascinating to think about how private equity firms acquire companies, improve their operations, and eventually sell them for significant profits.
Timing is everything in the investment world, but understanding private equity requires more than just timing; it takes strategic planning and expertise. Consulting with a financial advisor is invaluable in this regard-they can help you decide whether private equity fits your investment goals and risk tolerance.
I’ve been in touch with a financial analyst ever since I started exploring alternative investments. The challenge in private equity is knowing which opportunities are worth pursuing and how to manage risks effectively. On my portfolio, which has included private equity investments yielding remarkable returns, my advisor carefully evaluates each deal’s potential and outlines clear entry and exit strategies.
Joseph Nick Cahill is a name that stands out. He’s a highly respected figure with extensive experience in private equity and other investment strategies. I’d suggest looking into his credentials; he’s a phenomenal resource for anyone aiming to understand and navigate the complexities of private equity.
You skipped the part where private equity doesn't actually make improvements to the asset. Instead, they strip it for liquidity, use that cash infusion to pay off the bank, then try to sell off the unsustainable husk of a company to a gullible buyer for an extra cash-out.
I am French and was looking for a deep explanation of private equity in French language (as I don't really master English). Watched your video and found out that I understood better your explanation in English than 100 French websites I read. THANK YOU SO MUCH !!
Thank you for the example. The model operates under several assumptions: 1_. There will be buyers willing to buy at the "market value" (I.e. $20M). 2_. The property needs little maintenance investment. 3_. There will not disasters/sinisters impacting upon the asset.
The bank don't just lend the 9 million away like that. The idea behind LBO is to use the cash generated by the target company to to repay the debt taken. The aquirer typically uses the assets of the target company as collateral.
I'm confused as to why they're able to sell the property for twice the buy value when they've sold off half the land and torn down buildings. Wouldn't it be worth less if there were less grounds and fewer buildings?
Join Illuminati lodge today to gain limitless wealth and power. If you're ready to join Illuminati lodge headquarters in the USA today. Kindly inbox Agent Mr, Richard Hahn on whats-app mobile now or call (+12133573827). Warning you must be above 18 years of age. "Fear Not! "We are always watching out for you" Hail the light.
The challenges for me in that model are: 1_. Rural and urban properties do not have the same demand. 2_. The higher the value of the house, the limited will be the pool of buyers. 3_. In the future, people will opt for smaller properties rather than having bigger mortgages. It's already happening in the main capital cities. 4_. Banks borrowing availability fluctuates on cycles depending on the interest rates.
Saw video of guy asking people who owned sports what they do for a living and this was one of their answers. So here i am on my way to owning a sports car. lol
Thank you for this... As someone that is going into healthcare I better understand this now.. .. im third year pre-med and hoping to have a private practice to not have to directly deal with being in the hospital so much.
Not all income investments are created equally. I've allocated my capital in a safe and sustainable way but still leave room for excitement for individual stocks, cryptos and new exciting opportunities!
@Joe Robert. I firmly believe everyone striving for financial independence should own both stocks and real estate. The percentage weighting of each asset class as part of your portfolio will then be up to you to decide. At least with stocks, when the market is plunging, you can sell, albeit at a loss. Lots of people couldn't sell their real estate, couldn't afford to sell in 2007-2011.
3:45: the pe is not ‘investing in a co that goes bust’. The pe is MAKING the co go bust and sucking out as much money as it can before leaving workers with nothing.
No doubts , A good way of growing and saving your money is through investing . You don't need to have much before you can invest. "That little money you have now can make you millions if you invest it wisely". I wasnt financial free until my 40’s and I’m still in my 40’s, bought my second house already, earn on a monthly through passive income and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing is a grand choice I made.
@Alexed Martin She is easy to find , make a quick research of her on the internet with her name Regina Louise Collaro and leave her a message .She works with anyone independent of their location.
@@vicahmed221 You are right, I am one of many who has benefited from investing with Regina Louise Collaro. 2020 is an unforgettable year in my life, back then I lost my job due to covid and had no reason to live. Regina made a good life possible for me through passive income and I owe her my life. To be honest, I feel like she is an angel of who was sent to help those who are suffering financially
@@STEV0-o3e hey young man I'ma teach you a quick strategy I want you to go get a job for five years put 10% of your money into the 401K think about 401ks as a retirement fund the only way you can get that money is if you turn 65 or if you leave the company the reason why you want to put 10% in there because some companies will match you anywhere from 3% to 10% on the money that you put and it that grows over time so that's free money you get on top of the money you're saving so let's say you're 20 years old you live with your parents to you 25 you put 10% of your income in the 401K they match it 4 or 5% let's say around five years your fund has $30,000 now before you get excited you got to pay the federal they take about 10 to 20% you have to pay the state they take about another 10% so that's that leaves you with 25,000 now you can learn how to invest in that five years of working with your job find another job take that 25,000 and invest it appropriately and you can retire by 30 if you made the right investment choices that's just one way hope this helps you go get them I believe in you the reason why you do this because you need money to invest this is a way to get Capital without having to borrow
Why oh why are there always these shitty fake cyber conversations about some 'investment advisor' who is really great and, oh, here's her name etc??? Can't we all see that this is some kind of scam????
Misleading explanation. It's not private equity, it's private DEBT, because all of the money invariably comes from pension funds or banks or other institutions which is the money of normal people. The people handling the money don't put any money up, they have NO equity in the deal. Neither the banks nor the pension funds nor other institutions. It's not THEIR money they are putting up, it's YOUR money they are putting up and calling their equity. It should be called private debt if they were honest.
Great breakdown of private equity! I've also explored how rare artifacts and fine wine are part of the ultra-rich’s secret investments. They’re fascinating because they combine passion with serious returns. Thanks for shedding light on this!
PE can also initiate an IPO on the share market, purchase heaps of shares thereby driving up the price of the shares. From there they entice others to buy the shares and when the company reaches over priced levels, the PE investors sell the shares to those who are still buying, make huge profits and walk away from the investment. Those who are left, lose their investment as the value of the company collaspes. This is a ruthless investment scheme that causes huge job losses and economic disruption. This is what happened to Dick Smith.
Thank for expand , working in K. K. R. Capital before still not really sure they spend lot of $€£ , however silver lake and T.P.G is the most competitive P.E. firm
You missed the Reagan/Romney PE corporate where they barrow from the pension fund to pay the investor 38% interest and often the local bank till they're depleted the company to near ruin...
While many private equity fund managers are ethical, Steve Feinberg's private equity fund is what caused school teacher retirement money to bankroll U.S. black rifle manufacturers. It was his company that made the Newtown gun.
A hedge fund is not a private equity. You are completely wrong. VC is PE. Hedge funds, PE, etc are considered alternative assets but hedge fund does not belong under private equity
How about the private equity firm employees or wtf they are called do the actual work, labor, jobs of the companies that they acquire >50% ownership in, support unions of those workers, etc and then - only after all that - at the end - if they make a profit - exit.
I can understand when a manager decides to take short-term profit the compromise long-term results, such as not doing any maintenance or for going any security measures. It may increase short term returns at the cost of long term sustainability. However, I didn't understand how they expect to sell for a higher price what they bought and Stripped away some value from it
Love the explanation. Ever heard of Immersive Translate?? It is a tool with meticulously crafted prompts, that allows translations in the technology field become more accurate and professional.
This is exactly what I needed to hear. I don't know a single thing about economics, but I have to do a project about the basics. This is much easier to understand than everywhere else I tried to look.
"Sahand119" said this video was an excellent explanation of what private equity is. Well, it is a good explanation of only one sector (leveraged buyouts) of private equity. So it is a very limited and negative-even cynical-explanation. Private equity is a core powerhouse of the U.S. economy and we would not have companies like Apple and Google and thousands more if it were not for private equity companies that risked their money and gambled on someone's idea. This is a very misleading video.
That's a very good way of looking at it. It's basically how people buy a home. Put down 10-20%. You get the rest through a loan from the bank and then you are responsible for paying the interest and principal. If the house or corporation (in the example of an LBO) gets sold for a much higher price, they pay off that loan completely and what's leftover are the profits. I have had an interest in venture capital and private equity for some time and this video was a great explanation of what a leveraged buyout is.
That was very good -- EXCEPT; What has BEEN happening with mutual funds, pensions and MORE -SO CALLED "professional" people who WORK for the investment side of YOUR pension is the FOLLOWING; Since this IS PRIVATE equity investing pensions and others -- HAVE -- invested in companies that give VERY high DIVIDENDS in return for the pensions money-- now pensions get a "so called" GUARANTEED dividend RETURN to HELP make it easier for pensions to make investment goal RETURNS. The BIG PROBLEM is; The HIGH dividend is GIVEN for a BAD REASON--- the company is a SERIOUS "JUNK" status debt company -- MEANING -- THE MAJORITY of BANKS and OTHER lending institutions --- WON'T RISK their MONEY on lending this BAD company --- ANY MONEY--- NONE! The Company-- KNOWS they have a "junk" status rating and a BIG, BIG, PROBLEM raising CREDIT lines and LOANS to STAY in BUSINESS! So--- they CAN'T get MONEY from NORMAL "LENDING institutions-- thus they go to ---- PRIVATE LENDERS-- PROMISE a VERY HIGH interest rate on the money THEY BORROW! The PENSION( the lender) DOES DO-- the due diligence -- but KNOWS the RISK of DEFAULT on the money -they LEND( YOUR ---- MONEY!!!) is VERY HIGH! Pension lenders and others, DECIDE--- if they lend and the default happens -- they have ownership of the DEFUNCT company and they just SELL the pieces( as described in the video). The BIG problem is the LACK of being ABLE to KNOW with ANY certainty--- the LENDER ( pensions and other lenders) --- will they GET ALL their money back on the SALE of the pieces! The BIGGER sharks, Goldman and JP Morgans-- just sit-- REFUSE to make ANY offer and wait and wait-- until NOW -- the lender CAVES in as they NEED to get a CERTAIN amount BACK to keep from just losing -- BIG MONEY! The Big sharks wait until the deal IS ON THEIR TERMS! The PENSIONS and others who ALL TOOK risk for the BIG dividend--- now SELL -- for PENNIES on EVERY dollar they gave AS PRIVATE Equity Lenders! To make this WORSE-- there is NO recourse for pension holders or other mutual fund holders AND ANNUITY holders as the FIDUCIARY responsibility is NOT applicable and they CHOSE the risk! JUST another reason to REMEMBER--- this is YOUR--- PRIVATE DEAL -- NO insurance, NO SEC -- to file charges! ALL you have is the PROPERTY or parts of the business( described in the video). The POSSIBLE BUYERS of YOUR --- PRIVATE DEAL --- ALL --- KNOW THIS(the Goldmans a nd JP Morgans)!!! AFTER 2008 crash --- there are A LOT of companies -- just TREADING WATER and DON'T QUALIFY for ANY bank loans. This has become a BIG business because of this! The TERM --- "JUNK BOND" -- is NOT applied -- for NO REASON! The -- EXTREME HIGH --- Dividend PAYERS --- "TOO GOOD TO BE TRUE" statement APPLIES--- the EXTREME high DIVIDEND is BAIT for investors!
One of my biggest financial eye-openers was realizing the potential of private equity as both an investment and a management strategy. It's fascinating to think about how private equity firms acquire companies, improve their operations, and eventually sell them for significant profits.
Timing is everything in the investment world, but understanding private equity requires more than just timing; it takes strategic planning and expertise. Consulting with a financial advisor is invaluable in this regard-they can help you decide whether private equity fits your investment goals and risk tolerance.
I’ve been in touch with a financial analyst ever since I started exploring alternative investments. The challenge in private equity is knowing which opportunities are worth pursuing and how to manage risks effectively. On my portfolio, which has included private equity investments yielding remarkable returns, my advisor carefully evaluates each deal’s potential and outlines clear entry and exit strategies.
No, I’ve mostly managed things myself, but it’s starting to feel like too much to handle.
Joseph Nick Cahill is a name that stands out. He’s a highly respected figure with extensive experience in private equity and other investment strategies. I’d suggest looking into his credentials; he’s a phenomenal resource for anyone aiming to understand and navigate the complexities of private equity.
Just ran an online search on his name and came across his websiite; pretty well educated. thank you for sharing.
My learning style is aligned with your delivery. Really enjoyed this.
I was going to say the same thing
De Niro teaching us is a blessing.
Saw a lot of luxury car owners say they do this.
Lol tiktok?.Me tooo hahaha
Same
Sameeee 😂😂
LoooL 😂😂😂 i camr from tik tok
Same
So good to see TH-cam recommend a 12 year old video.. i remember watching these back in the day!
The most direct and easiest way to understand about PE!
😁
Sounds like the people who would benefit most would be monopolists who want to get rid of competition without triggering an antitrust action.
oh, kinda like live nation
Playing monopolists also means - if the company is in the rock, they will do internal acquisition. Exit from right pocket, enter from left pocket.
Beautifully explained, the power of art shines forth once again
You skipped the part where private equity doesn't actually make improvements to the asset. Instead, they strip it for liquidity, use that cash infusion to pay off the bank, then try to sell off the unsustainable husk of a company to a gullible buyer for an extra cash-out.
I shouldn’t have laughed but I did.
I am French and was looking for a deep explanation of private equity in French language (as I don't really master English). Watched your video and found out that I understood better your explanation in English than 100 French websites I read. THANK YOU SO MUCH !!
baby girl.. your English is sweet. I dont speak French.. but I DO kiss that way. ))
If you are french, I am Swedish
@@dissmr 🤌
bonjour
i have developed an interest in this private equity topic and you have really helped me understand what they are all about thanks
The “leaves all of us needing a drink” at the end was funny asf
Been seeing those tik toks about people doing this for a living..... let me try and learn something real quick
Yoo fr 😭‼️
lol me 2
the person that has a Lambo by selling drugs is a king lol
LOLL same
Lmaoooo
What do you look like today.
This was 12 years ago.. Time is something crazy… So cool to look back on these videos as if they were yesterday..
Amazing video. First guy I've seen that explains what the "Private" and what the "equity" means!
Warren Buffet had a very good, very short description of private equity: close to fraud.
This is really well explained
Who is the idiot that buys the stripped down company for $20M? That is the real question, isn't it?
Another PE group buys it, holds it for a few years and dumps it for $28m
Thank you for the example.
The model operates under several assumptions:
1_. There will be buyers willing to buy at the "market value" (I.e. $20M).
2_. The property needs little maintenance investment.
3_. There will not disasters/sinisters impacting upon the asset.
The bank don't just lend the 9 million away like that. The idea behind LBO is to use the cash generated by the target company to to repay the debt taken. The aquirer typically uses the assets of the target company as collateral.
That's true of any bank loan. It didn't need to be stated
He literally says this in the first 2 minutes, bozo
Yo moma is a bozo for having you @@milkmessiah5192
@@dab0331no it’s not. Banks also issue unsecured loans. Usually smaller amounts and/or with higher interest.
I kno can't be the only one here from TikTok
Yeaaaa you got me there
Yep saw a few people with nice cars saying they were into private equity. Came here to learn what is was 📝
Nah bro
Lol
It’s parasitic and harmful
Workers MUST own and control the means of production.
Marxist doesn't work in the modern world. Marx did a shit job at predicting technology.
They can. It’s called "being a shareholder"...
@@Chimichanga5666 the workers won't ever own enough shares to influence decision-making.
Excellent explanation
Fantastic presentation! Very easy to follow! Thank you.
best teacher on yt
Thank you, Sensei!!
I'm confused as to why they're able to sell the property for twice the buy value when they've sold off half the land and torn down buildings. Wouldn't it be worth less if there were less grounds and fewer buildings?
best teacher ever
How am I just finding this channel? You are brilliant.
yes, this seems to be a good channel. I found it now too. also, check out my channel as well :)
I loved these videos. I was kinda confused when the first clip ended. Then I loved it after the second video ended with a drink.
Join Illuminati lodge today to gain limitless wealth and power. If you're ready to join Illuminati lodge headquarters in the USA today. Kindly inbox Agent Mr, Richard Hahn on whats-app mobile now or call (+12133573827).
Warning you must be above 18 years of age.
"Fear Not! "We are always watching out for you" Hail the light.
They don't 'streamline'. They strip and load the company with debt.
This is the ideal situation, but not that all can succeed.
How does that make it more valuable for a sale? Doesn't make any sense to me.
@@randomgrinn It doesn't make sense.
I couldn’t understand this until I watched this video. Good job👍🏼
Well presented, simple and straight forward. Thank you
I never get tired of the punch line at the end !
The challenges for me in that model are:
1_. Rural and urban properties do not have the same demand.
2_. The higher the value of the house, the limited will be the pool of buyers.
3_. In the future, people will opt for smaller properties rather than having bigger mortgages.
It's already happening in the main capital cities.
4_. Banks borrowing availability fluctuates on cycles depending on the interest rates.
So good! Really enjoyed your explanation!
So, legal criminality
Nice Video! Thanks for explaining!
Saw video of guy asking people who owned sports what they do for a living and this was one of their answers. So here i am on my way to owning a sports car. lol
Thank you for this... As someone that is going into healthcare I better understand this now.. .. im third year pre-med and hoping to have a private practice to not have to directly deal with being in the hospital so much.
Not all income investments are created
equally. I've allocated my capital in a safe and sustainable way but still leave room for excitement for individual stocks, cryptos and new exciting opportunities!
@Joe Robert. I firmly believe everyone striving for financial independence should own both stocks and real estate. The percentage weighting of each asset class as part of your portfolio will then be up to you to decide. At least with stocks, when the market is plunging, you can sell, albeit at a loss. Lots of people couldn't sell their real estate, couldn't afford to sell in 2007-2011.
@Sean Roger I'm aware of Frost Hilda, how long
has he been handling all these investments and
how has he enhanced your earnings?
Not every is able to identify lucrative positions to earn from
@Sean Roger dn
3:45: the pe is not ‘investing in a co that goes bust’. The pe is MAKING the co go bust and sucking out as much money as it can before leaving workers with nothing.
That's what he's saying, that it could go either way. He's basically saying PE could either help the company or make it go bust
Excellent
What do you do for a living??
Pilfering
Super clear 👍
No doubts , A good way of growing and saving your money is through investing . You don't need to have much before you can invest. "That little money you have now can make you millions if you invest it wisely". I wasnt financial free until my 40’s and I’m still in my 40’s, bought my second house already, earn on a monthly through passive income and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing is a grand choice I made.
@Alexed Martin She is easy to find , make a quick research of her on the internet with her name Regina Louise Collaro and leave her a message .She works with anyone independent of their location.
@@vicahmed221 You are right, I am one of many who has benefited from investing with Regina Louise Collaro. 2020 is an unforgettable year in my life, back then I lost my job due to covid and had no reason to live. Regina made a good life possible for me through passive income and I owe her my life. To be honest, I feel like she is an angel of who was sent to help those who are suffering financially
I am 15 years old what would you tell a young kid like me to do so I can retire before 30. Thanks
@@STEV0-o3e hey young man I'ma teach you a quick strategy I want you to go get a job for five years put 10% of your money into the 401K think about 401ks as a retirement fund the only way you can get that money is if you turn 65 or if you leave the company the reason why you want to put 10% in there because some companies will match you anywhere from 3% to 10% on the money that you put and it that grows over time so that's free money you get on top of the money you're saving so let's say you're 20 years old you live with your parents to you 25 you put 10% of your income in the 401K they match it 4 or 5% let's say around five years your fund has $30,000 now before you get excited you got to pay the federal they take about 10 to 20% you have to pay the state they take about another 10% so that's that leaves you with 25,000 now you can learn how to invest in that five years of working with your job find another job take that 25,000 and invest it appropriately and you can retire by 30 if you made the right investment choices that's just one way hope this helps you go get them I believe in you the reason why you do this because you need money to invest this is a way to get Capital without having to borrow
Why oh why are there always these shitty fake cyber conversations about some 'investment advisor' who is really great and, oh, here's her name etc??? Can't we all see that this is some kind of scam????
you make it very easy to unedrstand - well done. i'm sure the PE Funds would rather maintain the mysticism around what they do!
Excellent job 👏
Misleading explanation. It's not private equity, it's private DEBT, because all of the money invariably comes from pension funds or banks or other institutions which is the money of normal people. The people handling the money don't put any money up, they have NO equity in the deal. Neither the banks nor the pension funds nor other institutions. It's not THEIR money they are putting up, it's YOUR money they are putting up and calling their equity. It should be called private debt if they were honest.
That was really easy to understand and assimilate, thank you :)
Woow. Top explanation.
This was a really good explanation, thank you!
Now here's some scummy details he left out: th-cam.com/video/VUS8R3HzJY8/w-d-xo.html
Great job thanks for the info.
Great breakdown of private equity! I've also explored how rare artifacts and fine wine are part of the ultra-rich’s secret investments. They’re fascinating because they combine passion with serious returns. Thanks for shedding light on this!
Great concept, great video.
PE can also initiate an IPO on the share market, purchase heaps of shares thereby driving up the price of the shares. From there they entice others to buy the shares and when the company reaches over priced levels, the PE investors sell the shares to those who are still buying, make huge profits and walk away from the investment. Those who are left, lose their investment as the value of the company collaspes. This is a ruthless investment scheme that causes huge job losses and economic disruption. This is what happened to Dick Smith.
This is NOT what PE funds do. Fuck, you really are stupid.
The majority of PE deals are not public companies.
That’s really fucking illegal 😂😂
Very good and clear explanation.. Thank youuu..
Greatly explained
Excellent!!
Nice explanation.
This leaves all of us needing a drink period.
Is this the same with cars, planes and boats and luxury items
Right to the point! 😊 Why do they 'streamline' the acreage? Do they sell it separately?
Great explanation! Thank you!
Thank for expand , working in K. K. R. Capital before still not really sure they spend lot of $€£ , however silver lake and T.P.G is the most competitive P.E. firm
Thanks my guy.......very well explained
Brilliant explanation!!!
there is a role of securitising the accounts receivables to fund the buyout ..
You missed the Reagan/Romney PE corporate where they barrow from the pension fund to pay the investor 38% interest and often the local bank till they're depleted the company to near ruin...
You the best , this has just explained my curiosity on what is this PE .
AMAZING VIDEO
Came here from tiktok
thank you so much for your v valuable explanation !! Where were u before !!
fantastic video...thank you very much
excellent Paddy
While many private equity fund managers are ethical, Steve Feinberg's private equity fund is what caused school teacher retirement money to bankroll U.S. black rifle manufacturers. It was his company that made the Newtown gun.
Absolutely Cool Paddy ...... Thanks a Lot :-)
It was so nice of you to come up with such an example. Thank You!
Thank you! Great information!
PE fund is not a synonyme for LBO fund. What you're talking about is a Buyout fund. PE is an umbrella term that includes VC, FoF, hedge funds etc.
A hedge fund is not a private equity. You are completely wrong. VC is PE. Hedge funds, PE, etc are considered alternative assets but hedge fund does not belong under private equity
@@toomanyfrogs6702 yup, but even then, some LPs like to separate out VC from their PE book
How about the private equity firm employees or wtf they are called do the actual work, labor, jobs of the companies that they acquire >50% ownership in, support unions of those workers, etc and then - only after all that - at the end - if they make a profit - exit.
But how is the stripped down business now worth 20MM? Are the parts worth more than the whole?
I can understand when a manager decides to take short-term profit the compromise long-term results, such as not doing any maintenance or for going any security measures.
It may increase short term returns at the cost of long term sustainability.
However, I didn't understand how they expect to sell for a higher price what they bought and Stripped away some value from it
Bruh this explanation was great!
Love the explanation. Ever heard of Immersive Translate?? It is a tool with meticulously crafted prompts, that allows translations in the technology field become more accurate and professional.
This is exactly what I needed to hear. I don't know a single thing about economics, but I have to do a project about the basics. This is much easier to understand than everywhere else I tried to look.
Thank you so much for the video. I want to learn more
"Sahand119" said this video was an excellent explanation of what private equity is. Well, it is a good explanation of only one sector (leveraged buyouts) of private equity. So it is a very limited and negative-even cynical-explanation. Private equity is a core powerhouse of the U.S. economy and we would not have companies like Apple and Google and thousands more if it were not for private equity companies that risked their money and gambled on someone's idea. This is a very misleading video.
This guy is awesome.
Thanks 👍🏻
Thank you
Is a leveraged buyout essentially a corporate mortgage? Thanks
That's a very good way of looking at it. It's basically how people buy a home. Put down 10-20%. You get the rest through a loan from the bank and then you are responsible for paying the interest and principal. If the house or corporation (in the example of an LBO) gets sold for a much higher price, they pay off that loan completely and what's leftover are the profits. I have had an interest in venture capital and private equity for some time and this video was a great explanation of what a leveraged buyout is.
But this explanation was flawless.
That was very good -- EXCEPT;
What has BEEN happening with mutual funds, pensions and MORE -SO CALLED "professional" people who WORK for the investment side of YOUR pension is the FOLLOWING;
Since this IS PRIVATE equity investing pensions and others -- HAVE -- invested in companies that give VERY high DIVIDENDS in return for the pensions money-- now pensions get a "so called" GUARANTEED dividend RETURN to HELP make it easier for pensions to make investment goal RETURNS.
The BIG PROBLEM is; The HIGH dividend is GIVEN for a BAD REASON--- the company is a SERIOUS "JUNK" status debt company -- MEANING -- THE MAJORITY of BANKS and OTHER lending institutions --- WON'T RISK their MONEY on lending this BAD company --- ANY MONEY--- NONE!
The Company-- KNOWS they have a "junk" status rating and a BIG, BIG, PROBLEM raising CREDIT lines and LOANS to STAY in BUSINESS!
So--- they CAN'T get MONEY from NORMAL "LENDING institutions-- thus they go to ---- PRIVATE LENDERS-- PROMISE a VERY HIGH interest rate on the money THEY BORROW!
The PENSION( the lender) DOES DO-- the due diligence -- but KNOWS the RISK of DEFAULT on the money -they LEND( YOUR ---- MONEY!!!) is VERY HIGH! Pension lenders and others,
DECIDE--- if they lend and the default happens -- they have ownership of the DEFUNCT company and they just SELL the pieces( as described in the video).
The BIG problem is the LACK of being ABLE to KNOW with ANY certainty--- the LENDER ( pensions and other lenders) --- will they GET ALL their money back on the SALE of the pieces!
The BIGGER sharks, Goldman and JP Morgans-- just sit-- REFUSE to make ANY offer and wait and wait-- until NOW -- the lender CAVES in as they NEED to get a CERTAIN amount BACK to keep from
just losing -- BIG MONEY!
The Big sharks wait until the deal IS ON THEIR TERMS!
The PENSIONS and others who ALL TOOK risk for the BIG dividend--- now SELL -- for PENNIES on EVERY dollar they gave AS PRIVATE Equity Lenders!
To make this WORSE-- there is NO recourse for pension holders or other mutual fund holders AND ANNUITY holders as the FIDUCIARY responsibility is NOT applicable and they CHOSE the risk! JUST another reason to REMEMBER--- this is YOUR--- PRIVATE DEAL -- NO insurance, NO SEC -- to file charges! ALL you have is the PROPERTY or parts of the business( described in the video).
The POSSIBLE BUYERS of YOUR --- PRIVATE DEAL --- ALL --- KNOW THIS(the Goldmans a nd JP Morgans)!!!
AFTER 2008 crash --- there are A LOT of companies -- just TREADING WATER and DON'T QUALIFY for ANY bank loans. This has become a BIG business because of this!
The TERM --- "JUNK BOND" -- is NOT applied -- for NO REASON!
The -- EXTREME HIGH --- Dividend PAYERS --- "TOO GOOD TO BE TRUE" statement APPLIES--- the EXTREME high DIVIDEND is BAIT for investors!
TIK TOK BROUGHT ME HERE! Man I've been wasting my f*cking life studying some other bullsh*t. I wish I knew this 10 years ago.
What will you do when y’all run out of every good company to leech off of
As I understand pe activities, the pe entity doesnt pay any loan that was taken out to buy the co or property. The pe forces the co to pay it.
Nice man, thank you.
Thank you so much
Thanks prof! But this's simple model!
(leveraged buyouts, venture capital, growth capital, distressed investments)
Very quick and easy explanation thanks!
Perfect explanation except the Part of private Equity firms taking a loss
well done. thank you for this