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Private Equity

Definition

Private equity (PE) refers to investment funds that acquire ownership stakes in companies that are not publicly traded. PE firms raise capital from limited partners (institutional investors, endowments, family offices) and deploy it to acquire, grow, and eventually sell portfolio companies, typically over a 3–7 year holding period. In the lower middle market, PE firms are the primary buy-side participants in M&A transactions.

Context

PE firms and their relationship-building practices with boutique investment banks are a central theme of Deal Sourcery. The podcast explores how PE firms can differentiate through Reciprocal Relationship Building rather than purely transactional engagement.

In Ep. 1, Karl Rectanus offers a founder's perspective on PE. After navigating LearnPlatform's exit process with approximately 100 parties, Karl summarizes PE in one word: "Impactful." He challenges the "bad stereotypical rap" that PE is simply about "financially ratcheting down costs" and argues that PE "has huge impacts" — whether through accelerating growth or through the consequences of leveraged buyouts. Karl's experience as a target receiving three to four PE outreaches per day by 2022 illustrates the intensity of buy-side competition.

In Ep. 20, Jake Colognesi describes the growth equity variant of PE, where firms take minority or significant minority stakes in bootstrapped companies rather than full buyouts. He notes the Sea of Alternatives — the sheer number of PE and growth equity firms competing for the same deals — and how LPs rank sourcing as a top diligence criterion.