Private equity explained

Private equity funds are groups of investors that flip companies for a profit. It's the technique they use that makes them special, as Paddy Hirsch explains. #MarketplaceAPM #PrivateEquity #Investing

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100+ komento:

Been seeing those tik toks about people doing this for a living..... let me try and learn something real quick
Jayden Janshego
Jayden Janshego:
I kno can't be the only one here from TikTok
G F:
Never studied economics and I only heard the name of Private equity recently, this video was perfect.... Thanks for the clarification ;)
This was a really good explanation, thank you!
The most direct and easiest way to understand about PE!
Malyna Ph
Malyna Ph:
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 !!
Abhinav Gautam
Abhinav Gautam:
Thank you, Sensei!!
Yeah its great business, but in the end, it is just making more money. The problem with the system is that money itself has no real value. It has a perceived value that is based on a ton of countless factors. But what happens when the money is no longer worth the paper it is printed on? Oh right BAD SHIT.
Richárd Magasy
Richárd Magasy:
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.
Oli Hasan
Oli Hasan:
U r a genius.
Daril Dsilva
Daril Dsilva:
excellent bro :(
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.
thatavarthi sudheer
thatavarthi sudheer:
It was so nice of you to come up with such an example. Thank You!
Coin Stacks
Coin Stacks:
Great job thanks for the info.
Alessandro Conti
Alessandro Conti:
Amazing explanation, thank you so much!
great vid keep doing these vids!!
Cool explanation.. You need a stand for your video camera though
Nice explanation.
Tom Bulgin
Tom Bulgin:
you make it very easy to unedrstand - well done. i'm sure the PE Funds would rather maintain the mysticism around what they do!
Vikram SD
Vikram SD:
Absolutely Cool Paddy ...... Thanks a Lot :-)
Raj Srinivas
Raj Srinivas:
Damn good
hoang lan nguyen
hoang lan nguyen:
Thank you for explaining that a private equity fund is what was once known as a leveraged buyout.
Ali 3shooogy
Ali 3shooogy:
If someone see my comment, I would like to know how they sell the land or the house by 20 million and they actually bought it half that price 🤔🤔!!!???
thank you so much for your v valuable explanation !! Where were u before !!
Great video, well explained
Good explanation.thanks
Stephen Williams
Stephen Williams:
How am I just finding this channel? You are brilliant.
felipe miranda
felipe miranda:
thank you for simplifying what private equity is..
Tarek Ahmed
Tarek Ahmed:
Came here looking for some information for investment options. Every video i watch for Paddy is so enlightening, and as i'm about to make a decision to go with what i've just learned, i get hit with that its all eventually going to " Leave us Very badly, needing a Drink " . I don't know why but that throws me off the whole thing instantly!
Still going to watch them all !
Simon Cheng
Simon Cheng:
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
Top 10 Channel
Top 10 Channel:
Youtube The Iron Triangle - The Carlisle Group
well done. thank you for this
Matthew Dyrmishi
Matthew Dyrmishi:
Very understandable, thanks man
James L.
James L.:
you dropped something lol
vinh le
vinh le:
Thanks prof! But this's simple model!
(leveraged buyouts, venture capital, growth capital, distressed investments)
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!
Very good!
Good job.
Super clear 👍
Hicham Idahmedali
Hicham Idahmedali:
perfect video
Benito Carmelo
Benito Carmelo:
did you read what you wrote? I don't think you really know what your talking about.
Alejandro Jr
Alejandro Jr:
who does the analysis to know if that is a good investment? 1st and 2nd year financial analysts or those investors?
vicente rivera
vicente rivera:
cool video!
0:52 servant's quarters? lol
vinnie cooper
vinnie cooper:
Excellent presentation!
Sandeep Sadula
Sandeep Sadula:
Bonaventure Barry
Bonaventure Barry:
love what you do. Great explanation, and we learn complicated concept.
Neeraj Ahire
Neeraj Ahire:
How does the bank just lend them that much money??? What if the PE investment fails to achieve good returns?
How do I get to be one of those ‘investors’?
Caziah Herrera
Caziah Herrera:
Where do u get the money from to Renovate the house
very good
Jonathan Sridhar
Jonathan Sridhar:
Very quick and easy explanation thanks!
peter ponce de leon
peter ponce de leon:
Bruh this explanation was great!
George Simon
George Simon:
Gordon Gekko here ??!!!
Jacob Yahiayan
Jacob Yahiayan:
Poor explanation of PEG. You can't just assume a bank provide the leverage 9:1 is not realty.
D Sword
D Sword:
That sounds sinister asf!
Ronnie2k /
Ronnie2k /:
Saw a lot of luxury car owners say they do this.
Seymoure Lykeley
Seymoure Lykeley:
very good job of explaining.
Danielle Miller
Danielle Miller:
Koketso Sibongiseni
Koketso Sibongiseni:
Brilliant explanation!!!
dane charles
dane charles:
So it’s pretty much flipping a business. Why all the other videos on here couldn’t explain it like that? 😂 Thank you!
very badly needing a drink!! and throws the pen away,,, cool
ebuss 16
ebuss 16:
best teacher on yt
uda kc
uda kc:
Are you from NPR?
Speed Racer
Speed Racer:
excellent Paddy
Jez Sanders
Jez Sanders:
Here after the tic tok vids LFG
Mayank Uniyal
Mayank Uniyal:
PE isn't limited to LBO. LBO is an option when the PE guys conclude the the target company has a number of assets that they can sell of as or use as collateral to repay the loan. PE are more concerned with restructuring the company and management. brilliant explanation though.
Is a leveraged buyout essentially a corporate mortgage? Thanks
Excellent explanation
So why did Gordon Gekko go to prison? Besides the insider trading part?
Don’t forget the CapEx.
Intelligent and handsome. Deadly
you're being VERY nice, in our completely left out the strip mining practice of LBOs. i.e. selling off all cash flow generating assets, firing senior staff, AND charging outrageous management fees, and saddling the new company with the debt. .... hell it's as if you didn't explain it at all.
@alasitis - You're right obviously. Private equity isn't always hostile and greedy. And you're correct, Silicon Valley got a lot out of venture capital in the 80s. But predatory looting of healthy businesses does take place and gives PE its bad reputation. Aside from some PR-type fixes, the industry hasn't done much to change the practice.
Daniel Kim
Daniel Kim:
Eddie Lambert and Sears is a great example of how a private equity firm can kill an American institution that was loved by many
Pascal Denis
Pascal Denis:
Not very representative of how value is created by PE firms
Guildsford Brothers
Guildsford Brothers:
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.
Poor explanation. Maybe accurate for the corporate raiders of the 1980s, but rarely does a PE firm come in and "sack all the staff". It's been studied and proven that most PE value is created by growing the business, not shrinking costs into oblivion. Just ask 3G.
TROGULAR 10,000:
so, the part I never understood: the company was bad in the first place, a staff layoff and cosmetic makeover takes place, and *that's* enough to make it attractive again and re-sold for more than it was bought for? What's the added value? Why the company bought again? Isn't it obvious to the final buyers that that the company is only profitable short-term because cuts have been made, that it's not on solid ground?
Completely misleading. The vast majority of private equity firms invest in growth and venture, without involving debt. Using the house example, 95% of private equity firms buy a small house, build it up and hire more staff.
they should add the breaking glass sound effect for when the pen drops at the end. thumbs this up & let's make them make this a reality, who's with me??!? :)
kay doyle
kay doyle:
Also known as vampire capitalism
kevin imp
kevin imp:
years latter the company goes out of business
Cassie Carter
Cassie Carter:
Forgive me if this is a stupid question
But could you as 1 of 10 investors, use a business loan to add to the pool of the combined investments used to obtain the $9million loan from the bank?
Matthew Craig-Greene
Matthew Craig-Greene:
So...not only do naughty private equity firms lay a bunch of people off and sell a bunch of assets, but YOU and other pensioners may also be doubly exposed to this terrible phenomenon through participation of your retirement system in both the private equity fund and the syndicated debt. I really wanted to like this video because Paddy clearly understands the mechanics of an LBO and how to explain it (very) clearly. Unfortunately, he chooses to push his agenda rather than just the facts. Shame.
mahuya sarkar
mahuya sarkar:
I dont know why nobody mentioned it.....but this guy is realllllllyyyy good looking....
Arturo Borges
Arturo Borges:
how do private equity funds underwrite and calculate every investment? meaning, what exactly are the sheets or instruments they use to calculate IRR, Equity Multiples, Cash flows, and overall underwrite and project for every fund?
Andy Johnson
Andy Johnson:
They are why long life employees get 15% of what they worked 42 years for. Good luck America, the few swindlers effect millions & millions of people. Someday these people will March to New York with pitchforks...
arnold abrahams
arnold abrahams:
This just lbo you can go buy bad hiuses in Rotterdam the houses there are cheap in realation to houses in london in paris in rome you llok for a group of people with somemoney and than go for borrowed money and buy all the hauses you can buy like crazy than you sit on those houses short term and sell them off flip them. Nothing special is a money game.
Robert McKinley
Robert McKinley:
"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.
there is a role of securitising the accounts receivables to fund the buyout ..
Aliancey X
Aliancey X:
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.
simbo s
simbo s:
What goes up in value so they can flip the house/company for a profit? I get they strip a companies assets down, and kill it, but after a companies stripped down, where’s the value coming thatll make you profit? Is it the land?