Shareholders' equity

Equity capital is called investment to acquire shares in companies holding companies and thus contribute to the value and success. Unlike debt, ie debt, equity does not have to be repaid. An investment company then earns money when the shares that have been purchased may be resold at a higher price.

In addition to many private, for-profit subsidiaries also some action in a public contract, such as the participation of companies in the states or the so-called SME investments.

In this heavily by America and England driven industry two tags are used to distinguish the different products, markets and customer groups. One speaks of venture capital and private equity.

Private Equity

So-called private equity firms usually acquire majority shares or qualified minorities in companies that generate profits. Qualified minorities include comprehensive voice and veto rights.

Private equity firms acquire companies ( - santeile ) with equity and debt (bank loans ). Through the future return of the loans from corporate profits is hoped that ultimately the acquisition of the company only by the equity portion. Therefore it is also called leverage effect ( = leverage ) in equity by a Share of debt.

The proportion of equity to liabilities depends on the future to service principal and interest free funds of the company. As a rough direction can serve 40 % equity to 60 % debt. In 2005 it is called plated locusts that use up to 90 % debt to acquire the shares. To meet this burden, a company must save very strong, mostly on personnel and research and development. The consequences of this can be dramatic for the future of the company. However, a regulating effect occurs because a private equity company only makes money if the company can be sold at a higher price than at which it was purchased. Would be a company totally undermined, it would be difficult to sell this.

Venture Capital

Venture capital firms are a special type of investment company that basically are to companies in an early phase of a company and often generate no profits or cash flows.

It is a venture capital. A venture capital firm invests in a growth-oriented companies with high earnings potential. The risk that the venture capital company incurs here is high.

The level of participation is often less than 50 percent, so it is a minority interest but with appropriate check - and participation rights.

The venture capitalists expect next to a profit sharing above all, an appreciation of its equity interest, which he wants to sell after five to seven years. After the exhaustion of the stock market as a sales channel in 2000, the most common way for the foreseeable future still the sale to an industrial partner, the so-called trade sale.

Venture Capital does not have to be repaid, but returns in case of success on the sale of the shares at a profit to the investors.