Equity co-investment


Equity co-investment

An equity co-investment (or co-investment) is a minority investment, made directly into an operating company, alongside a financial sponsor or other private equity investor, in a leveraged buyout, recapitalization or growth capital transaction. In certain circumstances, venture capital firms may also seek co-investors.

Diagram of the structure of an equity co-investment in a portfolio company alongside a financial sponsor

Private equity firms seek co-investors for several reasons. Most important of these is that co-investments allow a manager to make larger investments without either dedicating too much of the fund's capital to a single transaction (i.e., exposure issues) or sharing the deal with competing private equity firms. Co-investors bring a friendly source of capital.

Typically, co-investors are existing limited partners in an investment fund managed by the lead financial sponsor in a transaction. Unlike the investment fund however, co-investments are made outside of the existing fund and as such co-investors rarely pay management fees or carried interest on an individual investment. Co-investments are typically passive, non-controlling investments, as the private equity firm or firms involved will exercise control and perform monitoring functions. For large private equity fund of funds and other investors, co-investments are a means of increasing exposure to attractive transactions and making investments that have a higher return potential because of the lower economics paid to the general partner. As a result, many private equity firms offer co-investments to their largest and most important investors as an incentive to invest in future funds.

See also

References


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Equity Unit Investment Trust — A registered trust in which investors purchase units from a fixed portfolio of equities, which are chosen and managed by a professional money manager. Securities in the trust remain there for the life of the trust, which is most often one year.… …   Investment dictionary

  • investment research — ➔ research * * * investment research UK US noun [U] FINANCE ► the detailed study of the performance of different types of investments in order to decide which to invest in: »He manages portfolios, conducts investment research and assists in… …   Financial and business terms

  • equity interests — USA Also known as equity. An investment in an entity, such as capital stock, partnership interests and limited liability company interests, entitling the investor to a share of the entity s profits and enterprise value after the satisfaction of… …   Law dictionary

  • Investment banking — Investment banks profit from companies and governments by raising money through issuing and selling securities in the capital markets (both equity and bond), as well as providing advice on transactions such as mergers and acquisitions. To perform …   Wikipedia

  • Equity investment — generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of… …   Wikipedia

  • equity investment — ➔ investment * * * equity investment UK US noun [U] FINANCE, STOCK MARKET ► money that is invested in a company in the form of shares: »In order to develop the country s infrastructure we need a lot of capital, both loans and equity investment.… …   Financial and business terms

  • equity sponsor — USA Also know as a sponsor. Typically the manager or general partner of a private equity or venture capital investment fund. The sponsor is typically run by one or more private equity or venture capital investment professionals who are responsibl …   Law dictionary

  • equity — eq·ui·ty / e kwə tē/ n pl ties [Latin aequitat aequitas fairness, justice, from aequus equal, fair] 1 a: justice according to fairness esp. as distinguished from mechanical application of rules prompted by considerations of equity comity between… …   Law dictionary

  • Equity — can refer to:General* Equity (law), a branch of jurisprudence in common law jurisdictions * In many political and legal systems, a concept encompassing ideals of justice (fairness) and/or equality * Equality, the philosophical ideal of valuing… …   Wikipedia

  • Investment — or investing [British and American English, respectively.] is a term with several closely related meanings in business management, finance and economics, related to saving or deferring consumption.Investment is the choice by the individual to… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.