While private equity firms do not disclose their returns on investment, industry observers say that in general, returns to investors of private equity funds surpass returns from the public markets. Minimum investments are usually $1 million.
Nationwide, there are more than 2,600 private equity firms, and they have a total of $2.9 trillion in assets under management, according to Pitchbook, a Seattle-based research firm. Firms’ investments peaked in 2007, dropped during the recession, began to rise again in 2011, but have slowed again so far this year, PEGCC figures show.
There are 15,300 companies nationwide that are backed by private equity investment, including 826 in Florida, the lobbying organization said.
Last year, private equity firms invested $144 billion in U.S.-based companies, including $7.6 billion in businesses based in Florida, Theran said.
While huge, multi-billion dollar firms like the Blackstone Group, Kohlberg Kravis Roberts, the Carlyle Group and Bain Capital are perhaps best known, many smaller private equity firms are scattered across the nation.
Florida has 96 private equity firms, and several are based in Miami-Dade and Broward counties. Among them are the state’s largest, H.I.G. Capital; and Trivest Partners, which was the first to open in the Southeastern U.S. Two relative newcomers are Pine Tree Equity Partners and Boyne Capital, both founded six years ago.
“Miami is a real success story in private equity,” said Derek McDowell, managing partner of Boyne Capital, who previously worked for H.I.G. Capital and Trivest. “If you went back 25 years ago, there was only one firm here, Trivest. Since then, the growth and creation of H.I.G., Sun, Brockway, Boyne and Pine Tree, it’s really grown as a community.” Sun Capital Partners and Brockway Moran & Partners are both based in Boca Raton.
And despite a still shaky economy, the local private equity firms are on the hunt for investments.
Joshua Kaye, U.S. co-chair of the healthcare sector at the global law firm DLA Piper, which represents some of the local private equity firms, said that overall, private equity players are more active now than they were during the past year or two.
“Now we’re seeing that having the cash available but not having dispensed it, there’s a strong desire to seek investment opportunities,” he said.
As potential investments, South Florida businesses remain attractive to private equity funds because of the region’s role as the gateway to Latin America, said Jackie Hodes, a partner in the corporate securities group at DLA Piper in Miami. Both she and Kaye say healthcare, energy, education and real estate are areas that are hot right for private equity investment.
However, selling out to a private equity firm has both advantages and disadvantages, said Thomas Tew, a senior partner at Tew Cardenas in Miami, who often advises business clients. Sometimes relinquishing control can run counter to the entrepreneurial business founder’s spirit.
“As an advantage, they’ve got the money, they are usually very bright and focused, they know the business segment and they have done their homework,” Tew said of private equity firms. “The question is: Does their growth and exit strategy match yours?
“You are taking in an intelligent partner who brings a lot to the table. But you have to make sure those objectives are the same.”