Analysis and News

Private Equity and Guyana

Private equity is the ownership or interest in a company that is not listed or traded on a public exchange. The private equity market is a valuable source of capital for start-ups, small businesses, private middle-market companies, distressed companies, and public companies seeking buyout finance. 

Private equity firms take a large share position in such businesses with the goal of turning them into industry leaders and profit-generating enterprises. Focus is placed on revenues, cash flow, debt financing and management. The PE firm grows the business with their experience, network and adding value. The private equity industry comprises institutional investors and major private equity firms funded by an investment pool. 

Venture capital, a sub-category, has continued to grow at a rapid pace. Preqin, a financial data company, expects assets under management to reach $9.11 trillion by 2025, almost doubling its projection of $5.9 trillion in 2022 and nearly four times the amount from the start of the preceding decade, $2.38 trillion in 2015.

Bond yields remain low and public equity returns are expected to be below historical annualised returns over the next ten years. Pension funds, insurance companies, endowments, investment companies and banks are increasing their allocation to private capital. From 2008 onwards, the median net internal rate of return has consistently been circa 12 percent. PE's excellent returns have been accompanied by large capital distributions to limited partners — more than $2 trillion to investors in the last five years.

The pandemic did not significantly impact PE target allocations. According to Preqin, investors are bullish and intend to boost their PE allocations in the coming years. Numerous private equity firms have stepped forward to assist their portfolio companies in a variety of ways since the outbreak in early 2020. 

It's also crucial to understand the exit strategy aspect of PE. While companies may choose to keep a profitable endeavour, they also have the option of developing an "exit strategy." Secondary buyouts (SBOs) are becoming more popular as a way for PE investors to exit their investments, and the SBO market now has adequate liquidity to sustain even billion-dollar deals. SBO climbed by 5.2% each year from 2006 to 2019 and PE exits via Initial Public Offerings decreased by 7.3% per year.

While they are several private equity entities in the Latin America region, the landscape in the Caribbean is in need of development. Players with portfolio investments include SEAF, CPEP, Portland Private Equity, Williams Caribbean Capital, Norbrook Equity Partners, among others.


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