(Reuters) - Carlyle Group LP will now allow people to invest as little as $50,000 in its new buyout fund, a regulatory filing showed, as private equity firms look to widen their customer base in search of new sources of funding.
The lowered entry point is down from Carlyle’s earlier minimum investment of between $5 million and $20 million, according to a filing made with the U.S. Securities and Exchange Commission (SEC) in January.
The opportunity to invest in the new Carlyle buyout fund will be available to “accredited investors,” who are defined as having a net worth in excess of $1 million, or income in excess of $200,000 in each of the two preceding years prior to the investment.
The new closed-end fund - known as CPG Carlyle Private Equity Fund LLC - has signed up Central Park Advisers LLC as investment adviser, which means Carlyle will not directly deal with individual investors.
Carlyle’s competitors, KKR & Co, Blackstone and Apollo Global Management LLC have already launched mutual funds targeting retail investors through their institutional asset management platforms. Those funds will invest in credit products.
Carlyle, however, will be the first big private equity firm to allow relatively small investors to invest directly in buyout funds.
The news was first reported by the Wall Street Journal late on Tuesday.
Reporting by Sakthi Prasad; Additional reporting by Sagarika Jaisinghani in Bangalore; Editing by Matt Driskill
The minimum for entry into Carlyle's funds previously was between $5 million and $20 million, according to a securities filing for the new fund. The new fund, with a minimum investment of $50,000, will be available to "accredited" investors, essentially those with $1 million in wealth not including their homes.
A buyout fund is a type of private equity fund that typically seeks to gain controlling or majority (>50%) ownership of a company, with the goal of creating value by improving the operations of the company. 1. The fund later seeks to sell or take these companies public at higher valuations.
A buyout is the process whereby a management team, which may be the existing team or one assembled specifically for the purpose of the buyout, acquires a business (Target) from the current owners of Target using equity finance from a private equity provider and debt finance from financial institutions.
Buyout funds are the most common form of private equity. They typically invest by taking a controlling stake in privately-held companies, working to improve the operational efficiency and profitability of these businesses, so as to enhance the return on investment when the stake is sold.
With $373 billion of assets under management as of December 31, 2022, Carlyle's purpose is to invest wisely and create value on behalf of its investors, portfolio companies and the communities in which we live and invest.
In an all-cash buyout, the acquiring company purchases all shares in the target company using cash. Shareholders of the target company will not be issued any shares of the acquiring company. Instead, they will simply be offered money for surrendering their shares.
If the deal is an all-cash deal, all the shares of the stock will be removed from the portfolio at a point based on the deal's final date and this will be exactly replenished by the cash value of the shares that are mentioned in the buyout.
A buyout package usually includes benefits and pay for a specified period of time. Employee buyouts are used to reduce employee headcount and therefore, salary costs, the cost of benefits, and any contributions by the company to retirement plans.
A fair percentage for an investor will depend on a variety of factors, including the type of investment, the level of risk, and the expected return. For equity investments, a fair percentage for an investor is typically between 10% and 25%.
A buyout may get rid of any areas of service or product duplication in businesses. It can reduce operational expenses, which in turn can lead to an increase in profits. The business taking part in the buyout can do a comparison of individual processes and select the one that is better.
Our advice is to stick to the general rule of 20 to 25% of businesses income. If your investor is more interested in cashing in on equity growth, you can offer 15% of the business or more, depending on how much money the investor provides.
The estimated total pay for a Partner at The Carlyle Group is $521,120 per year. This number represents the median, which is the midpoint of the ranges from our proprietary Total Pay Estimate model and based on salaries collected from our users. The estimated base pay is $232,402 per year.
Carlyle's reputation for tax-scamming at the time came from the firm exploiting a brief tax loophole which allowed Eskimo-owned companies to sell their losses for cash, allowing American firms to offset their gains against Eskimo losses and avoid income taxes.
Growth equity funds target companies that have potential for scalable and renewed growth. Unlike buyout funds, they usually take a minority stake with the intention of growing the business as much as possible. But - like buyout funds - the goal is to exit at a higher multiple.
When the buyout occurs, investors reap the benefits with a cash payment. During a stock swap buyout, investors with shares may see greater corporate profits as the consolidated company and the target company aligns.
Buyouts usually happen because the party acquiring the company believes it can improve the company's prospects for growth or repair its financial or operational deficiencies. When a private equity firm acquires a company, it aims to improve the company's performance in order to sell it at a later time.
Buyouts are severance packages designed to incentivize employees to exit an organization. Sometimes they are a warning of future layoffs and other times, they are just a cost-cutting strategy for companies to lower their wage expenses.
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