An undergraduate at the University of Oklahoma, Evan Drake Hudgins has completed multiple internships in the field of finance. One of the concepts Evan Drake Hudgins learned was private equity (PE) acquisition pathways.
PE is often focused on exerting change in companies that enable greater efficiencies and profits to be realized. Deliverables expected by PE investors include clear pathways toward transformation that provide significant returns on capital. These investors also leverage existing management teams, while creating new synergies through new markets, joint ventures, and other partnerships.
Naturally, not every PE transaction meets these optimal risk-return parameters and there are, therefore, various alternative funding pathways available, such as debt and equity hybrid mezzanine financing. The relative risk of the transaction is reflected in aspects of the investment, such as the level of operational control taken on, valuation, and the financing vehicle in play.
The use of private equity as an M&A strategy is particularly concentrated in the technology sector, with approximately 43 percent of M&A financed through this form of capital. Also, of these M&A transactions, more than half are in the large equity arena with $50 million to $1 billion.
