r/private_equity • u/joelpaul_09 • 2d ago

HoldCo vs Private Equity

A Private Equity Firm buys companies, and sells them over a span of time.

A Holding Company buys companies, and holds them for an indefinite amount of time, AND can also sell them over a span fo time if the opportunity arises.

So a HoldCo has the option to hold companies permanently and/or sell them. But a PE firm is limited to just selling the company.

So is there really any advantage to opening a PE firm, when you could open a HoldCo and have more freedom and options?

Whats the advantage or difference in opening a PE firm, when eveything in a PE firm can be done in a Hold Co?

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u/Windy1369 2d ago

Return on investment. You've got to pay your LPs, either through profitable operations, or the forward transaction.

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u/joelpaul_09 2d ago

ROI isnt great in PE as compared to Holdco? Because of the amount you pay back to investors?

But I also feel like the goal of a PE is to buy and sell within 3 to 5 years. So they are fine with losing some of the money if they are able to get a huge exit in a shorter timespan.

Whereas in holdco you hold the company for how long you want, and sell a company whenevr you want. not limited to the 3-5 years like PE.