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Private equity explained

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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. Subscribe to our channel! https://youtube.com/user/marketplacevideos
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Text Comments (80)
Alessandro Conti (2 days ago)
Amazing explanation, thank you so much!
onetamer (17 days ago)
Super clear 👍
mahuya sarkar (30 days ago)
I dont know why nobody mentioned it.....but this guy is realllllllyyyy good looking....
Richárd Magasy (1 month ago)
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.
SI0AX (3 months ago)
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.
Chris Brown (4 months ago)
This pretty much explains why I was made redundant a couple of years ago
KAKA MAZE (4 months ago)
Bruh this explanation was great!
Arturo Borges (9 months ago)
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?
revistadearmas (1 year ago)
To make it more easy to understand PE Investors are leeches they don’t give a shit about workers or services including healthcare Mother fuckers milking the taxes of citizens and using their hard earn money mother fuckers !!
Richard A Pico (1 year ago)
how does PE company make money when the target LBO goes bankrupt such "as toys are us"?
Uday Krishna Uddanti (1 year ago)
TIW Private Equity has a dominant presence in National and Internation events over years. TIWPE's Partners are sought out speakers in the Private Equity space. Below are few events which had TIW Private Equity's presence 1. Startovation 2017 http://blog.howdy.do/startovation/ 2. PENSION FUND INVESTMENT SUMMIT- PANEL DISCUSSION http://pensionfundsummit.com/Speakers.aspx 3. SuperInvestor Asia 2014 http://tiwpe.com/superinvestor.php 4. Howdy Ventures Launch http://www.dqchannels.com/howdy-ventures-launches-messaging-app-howdydo/ 5. AVCJ Japan 2015 https://10times.com/avcj-private-equity-tokyo 6. AVCJ USA 2014 http://alphaideas.in/2014/12/03/notes-avcj-private-equity-conference-day-2/ 7. GTECH Leaders Meet 2017 http://tiwpe.com/gtech.php 8. Kerala Startup Mission 2017 http://tiwpe.com/ksum.php
Neeraj Ahire (1 year ago)
How does the bank just lend them that much money??? What if the PE investment fails to achieve good returns?
j.margiela (1 month ago)
Mostly likely they put the asset as collateral if they failed to pay back the loan + interest
Derrick Tan (1 year ago)
This is misleading and not conclusive of what all PE firms do. Please do not teach the wrong thing
The Hot Professor (1 year ago)
stupid. Dont lie to people. PE does not equate to LBO. An LBO is just one form of a PE deal. Take down your stupid misleading video
arnold abrahams (1 year ago)
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 etc..so 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.
Alex Vanzijl (1 year ago)
arnold abrahams Right....
tauyanash3 (2 years ago)
fucking brilliant,,,
Coin Stacks (2 years ago)
Great job thanks for the info.
Tarek Ahmed (2 years ago)
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 !
Aliancey X (3 years ago)
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.
Constantly Workin (3 months ago)
That’s really fucking illegal 😂😂
Jordan F (1 year ago)
This is NOT what PE funds do. Fuck, you really are stupid. The majority of PE deals are not public companies.
Mayank Uniyal (3 years ago)
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.
Jordan F (1 year ago)
WRONG! Every private equity deal is an LBO as you will never buy a company with all equity or the returns will be too low and the GP wont get carry
jubjubgurl (3 years ago)
This was a really good explanation, thank you!
Sandeep Sadula (3 years ago)
G F (3 years ago)
Never studied economics and I only heard the name of Private equity recently, this video was perfect.... Thanks for the clarification ;)
Theresa May (1 year ago)
no need for this abuse.
LORDE 2729 (2 years ago)
its related to finance . not economics. not really
Daril Dsilva (3 years ago)
excellent bro :(
Raj Srinivas (3 years ago)
Damn good
Vikram Sd (4 years ago)
Absolutely Cool Paddy ...... Thanks a Lot :-)
BlkJ19 (4 years ago)
This seems cancerous to the company it self and the people who work there. No different than a gang bang with a woman and 10 guys. She is getting the shaft excuse the pun.
Jordan F (1 year ago)
How is it cancerous to the company? Most PE acquired companies do extremely well, increase head count and make money for everyone. Most companies that are not public have Private Equity money in them. Dont be stupid
Louis-Simon Ménard (3 years ago)
+Nanofuture87 I know someone who've seen it happen from the inside, it's as bad as he describes it and worst.
Nanofuture87 (4 years ago)
He went overboard with the explanation.  In reality the PE fund usually brings in better management and makes improvements (more efficient, better strategy, etc.), making the company itself better off.
Danielle Miller (4 years ago)
RB T (4 years ago)
Wow, how irresponsible.  This is a terrible depiction.  LBOs are one form of Private Equity and certainly some outfits buy companies, strip them and flip them, however that is a minority of PE funds.  Ask yourself why shareholders/owners would ever sell themselves to a PE outfit like that.  Other PE firms also use LBOs to buy companies and improve them.  Most PE funds are small, go unnoticed, take extreme risk in investing in seed stage companies and continue to nurture them as they grow and mature until someone else acquires them.  'Explaining Private Equity' via a generalization and bias against a few bad eggs is inexcusable.  Good job contributing to misinformation on the internet - we really need more of that.
Jordan F (1 year ago)
You are also not very smart. 1. No PE fund will ever deliberately "strip and flip" 2. Most PE funds DO NOT take extreme risk. VC funds do take on more risk, but this is not "extreme risk" So, Good job contributing to misinformation on the internet - we really need more of that.
Ipkiss Stone (4 years ago)
@RB T At 3:36 he says "PE funds do work, they do a lot of good business, they create companies that are streamlined and go on to make a lot of money and hire more people". I thought the explanation was well balanced. Ultimately a PE fund is out to make money, they don't have altruistic intentions. There is an undertone in this video that makes it pure entertainment but at the same time educational :)
Shubham (5 years ago)
ApartmentTrustees.com (5 years ago)
Nice explanation.
Oli Hasan (5 years ago)
U r a genius.
blllllllllleugh (5 years ago)
Is a leveraged buyout essentially a corporate mortgage? Thanks
Nikhiil Yerne (5 years ago)
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InstTaxSolutionsLLC (5 years ago)
Thank you for explaining that a private equity fund is what was once known as a leveraged buyout.
Matthew Craig-Greene (5 years ago)
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.
xVanillaForeverx (5 years ago)
great vid keep doing these vids!!
felipe miranda (6 years ago)
thank you for simplifying what private equity is..
M N (6 years ago)
very good
Miscellaneouscoolvid (6 years ago)
Good explanation.thanks
Simon Cheng (6 years ago)
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
Guildsford Brothers (6 years ago)
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.
Shakaama (6 years ago)
you're being VERY nice, in our explaation.you 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.
Top 10 Channel (6 years ago)
Youtube The Iron Triangle - The Carlisle Group
wasanfan (6 years ago)
thank you so much for your v valuable explanation !! Where were u before !!
sotatwins (6 years ago)
did you read what you wrote? I don't think you really know what your talking about.
godspawn007 (6 years ago)
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.
pureinhart (6 years ago)
Great video, well explained
Candlemas (7 years ago)
@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.
Robert McKinley (7 years ago)
"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.
Michael Shibilski (7 years ago)
So why did Gordon Gekko go to prison? Besides the insider trading part?
Malyna Ph (7 years ago)
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 !!
Bonaventure Barry (7 years ago)
love what you do. Great explanation, and we learn complicated concept.
Tom Bulgin (7 years ago)
you make it very easy to unedrstand - well done. i'm sure the PE Funds would rather maintain the mysticism around what they do!
siidheart (7 years ago)
very badly needing a drink!! and throws the pen away,,, cool
houdapurple (7 years ago)
vinh le (7 years ago)
Thanks prof! But this's simple model! (leveraged buyouts, venture capital, growth capital, distressed investments)
jonesr227 (7 years ago)
Good job.
hoang lan nguyen (7 years ago)
MS (7 years ago)
Cool explanation.. You need a stand for your video camera though
Lucho Portuano (7 years ago)
preciousmetals168 (7 years ago)
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??!? :)
truthdemon (7 years ago)
there is a role of securitising the accounts receivables to fund the buyout ..
foyez5 (7 years ago)
Very good!
Brad Smith (7 years ago)
Note, the purpose is not to buy and build a business. It is not to "innovate" or make a profit off of your own creation. It is not to create jobs. Jobs might be lost, maybe eventually created, who knows. The only purpose of the LBO is to make money for the investors. They might make the money by building the business up. They often make the money by stripping the company down, selling the assets, firing all the workers and pay themselves big fees in the process. Bain Capital and Gordon Gekko.
James L. (7 years ago)
you dropped something lol
EqualLandFreePeople (7 years ago)
Bain is a private equity fund?
Speed Racer (7 years ago)
excellent Paddy

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