Buyout Fund

Supplier of private equity that invests in mature and often troubled companies to improve their financial position. Exits usually come through mergers and acquisitions. In 2004, the total global value of this sector, including new capital and earlier investments, was $25.1 billion, up 11% in one year (and surpassing for the first time the VC sector, worth $20.8 billion).

Buyout funds represent a significantly larger market segment within private equity compared to venture capital. Mega-cap buyout funds typically will take public companies private through a leveraged buyout. Mid-market funds will purchase private companies or divisions of larger companies.

Buyout funds add value by restructuring operations, by buying opportunistically when companies are selling at less than their intrinsic value, or by capturing gains by adding to or restructuring existing debt. They can realize these gains through a later public offering, selling the company to another buyer or by recapitalizing (borrowing and using the proceeds to pay a special dividend).

Buyout funds differ from venture capital funds in a number of ways:

They are usually highly leveraged
Cash flows to investors are typically more stable and start sooner
Returns are not as subject to measurement error

The objective of the Fund is to achieve capital appreciation with optimum returns, within controlled levels of risk, over the medium to long term by investing in management buyouts and build-ups and growth equity investments.

The Fund will also target rapidly growing companies that are profitable, have proven business models and require capital for expansion but are likely to provide liquidity to the Fund during its tenure through a stock market listing or a trade sale.



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