Most people in Germany – often without being aware of it – have already been dealing with private equity for a long time. Perhaps they have retirement or life insurance that invests in private equity funds. Maybe they work at or are a customer of one of the many companies financed by private equity. Douglas, WMF, Hussel, Eismann Tiefkühl Service, Zalando, Lieferheld, Jack Wolfskin – the list is extensive.
Private equity refers to the capital that primarily institutional investors have invested in companies not listed on a stock exchange. Private equity funds purchase shares of companies that they believe will increase in value over time. These could be family-owned companies, subsidiaries or larger companies or even small start-ups.
There are many reasons for these companies to sell shares to private equity funds: entrepreneurs want to get rid of their shares as part of their succession plan, a concern would like to divest a subsidiary that no longer fits with its business strategy going forward or start-ups need capital to get their ideas off the ground. The involvement of private equity firms opens up a myriad of new possibilities for the companies. With the additional capital, they can develop new products, open up new markets or acquire competitors. What is the objective of the private equity firm in this process? To make companies better and more competitive – and therefore more valuable.
Private equity has great economic importance. Private equity firms ensure that the necessary capital and expertise make their way to Germany, thereby contributing significantly to ensuring the growth of and to strengthening the competitiveness of German companies. They strengthen many medium-sized German enterprises in particular; in view of its investments, the private equity market is primarily a medium-sized market.
A large proportion of private equity comes from England, the United States and Canada. The reason for this is the retirement systems in place there, which – in contrast to Germany – are exclusively based on pension funds rather than apportionments. These funds manage the money entrusted to them and profitably invest portions of it in private equity funds. These funds provide for the retirement of many employees with yields that often reach double figures. Institutional investors (e.g. insurance companies, banks or pension funds) are the sources of capital for private equity firms. The private equity investment class has established itself as a permanent part of institutional investment strategies.
Find more about how private equity works in our brochure "Industry 4.0 - With private equity into a new era". There you will find more examples of companies financed by private equity.