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private equity firms buying publicly traded busisnesses

April 3, 2016 | Author: | Posted in company analysis, mathematics and economics

Private equity firms buying publicly traded businesses

Purchases of publicly traded businesses by private equity firms-the growing trend

Private equity markets are witnessing a flurry of activity and growing at a phenomenal rate because of large deals . On the whole private-equity firms made a spending close to 50 billion during 2006 which is five times what they spend for instance in the U .S . healthcare company purchase deals in 2005 , in the opinion of Dealogic- a company that follows global M A activities . To continue with the example , the U .S [banner_entry_middle]

. healthcare industry that is worth 1 .8 trillion or more than 1 of every 7 spent in the nation ‘s economy is gearing towards for investment from Private equity firms , in the opinion of industry analysts and firms involved . For instance the 32 .7 billion deal of hospital operator HCA Inc . led by private-equity firms Bain Capital LLC , Kohlberg Kravis Roberts Co and Merrill Lynch Global Private Equity which was agreed to by the shareholders during November 2006 (Japsen , 4

The main drivers of these activities are due to the inherent size of the healthcare industry and its fragmented nature of functioning throughout the nation due to which it appears natural that investments by publicly traded companies are unable to tackle the growing U .S . medical-care system on its own . In the opinion of private-equity firms , publicly traded companies such as HCA are drawn towards private ownership in part since it eases them of the pressure of reporting regarding their earnings on a regular basis to the Wall Street and the public (Japsen 4

Who is going to be impacted and how

Private-equity firms are possibly the newest phenomena on the Wall Street at the moment , equipped with the financial muscle to buy the publicly traded companies . The impact of this has been in more ways than one . The reach of the private equity companies into the financial markets is poised to change the structure of the stock market by way of placing a rising number of big-ticket companies beyond the reach of small and average investors besides placing several retirees pension and retirement funds into increased speculative investments compared to earlier . Basically this a refurbished form of the leveraged buyout — LBOs firms of the 1980s under which these firms enter into deals with companies that are undervalued , put them into shape and dispose them following earning of a quick profits in a very short time . Their secret has all along been the efficient use of debt that is normally close to 70 cents of every dollar invested . As they stack debt on the companies which they enter into deals , private equity firms free up their own money , thereby permitting them to make more investments and maximize their potential returns (Krantz , 10

The amount invested in private equity touched 139 .6 billion during 2005 which was double the amount compared to 2003 , according to Citigroup authorities . This figure is more than 135 .8 billion which were invested in… [banner_entry_footer]

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