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Private Equity (PE) Firms and Venture Capitalists are quite similar. Both types of M&A buyers consist of established bankers and businessmen, and they both invest in businesses in order to gain more capital.
However, knowing the differences between the two is helpful if you are looking to sell or purchase a business.
PE firms purchase companies in just about any industry, generally ones that are already well established. PE firms want complete control of these businesses so that they can turn them around for resale, so they purchase with leveraged buyouts (LBOs) and sometimes shuffle around the inner workings on the company. With PE firms, there is more money to go around, so in turn, more money is available for earning.
Venture capitalists are more interested in startup companies, and they generally only invest in a portion of the company, rather than the acquisition of the entire thing. Because of this, venture capitalists are taking a higher risk by investing in a younger company, baking one the eventual success of one of their investments making up for failed investments.
Now that you are armed with the knowledge of these types of M&A buyers, you can use this in order to sell or purchase a business of your own. If you are still in need of assistance selling or buying a business, contact the Region's Premier Business Brokerage Firm, George & Company.