CIMA F3 Syllabus D. Business valuation - Acquisition by private equity or venture capitalist - Notes ^{6 / 7}

Acquisitions are often made or supported by private equity (PE) or venture capital (VC) investors.

The main differences between these types of investor are as follows:

1) Nature of investment

• Venture Capital

  VC investors tend to invest in many companies, expecting some to fail, but a small number to make huge returns to compensate for the companies that fail

• Private Equity

  PE investors tend to invest large amounts in a small number of companies.

2) Type of target companies

• Venture Capital

  VCs tend to invest in young companies especially start-ups

• Private Equity

  PEs tend to invest in mature established companies

3) Typical shareholding

• Venture Capital

  less than 50%

• Private Equity

  100%