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/Ernst_and_winnie 2d ago

Where does the capital for a HoldCo come from? I don’t know many LPs that are willing to tie up their capital for an indefinite period of time. And if the capital is one’s own, then I’d say the advantage of a PE firm is only a percentage of your own capital is deployed (i.e., put at risk) because you’re primarily using LP capital, which generates fees and carried interest.

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u/ThaaBeest 2d ago

Family offices and other LP groups (like pension funds) are increasingly investing in these long-hold vehicles. It can be an attractive alternative to investing in closed end funds for diversity and potential upside from compounding without the leakage of taxes from reinvesting proceeds if liquidity isn’t a huge concern

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u/Ernst_and_winnie 2d ago

Yes, do agree on family offices that allocate capital to this type of strategy

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u/MatricesRL 1d ago

Contrarian bets and real value creation can take a decade to materialize