For short, private equity IT, or PEIT, is a type of business that has been steadily growing in popularity. Private equity is the purchase of one company by another to improve performance and maximize profits. The same concept applies to private equity IT – it’s an investment strategy where private investors make information technology (IT) investments to generate better returns than typical public stocks provide.
PEIT has many benefits, including higher returns on investments due to lower fees and less volatility than public markets. However, there are also drawbacks, such as lack of liquidity for shares gained through this method, which can make exiting difficult without incurring substantial losses if you need cash fast. Investors, for example, such as these in Britain, saw an uptick this year (2021) in returns.
Here are the top two benefits and drawbacks of private equity IT:
- Benefit # One, PEIT capital investments offer higher returns than typical public markets.
- Drawback # One, lack of liquidity – There may be times when you want or need to sell your shares quickly. Still, because PEIT investments are not registered with the SEC (Securities and Exchange Commission), they cannot be sold as rapidly as stocks on the public market.
- Benefit # Two, lower fees because of private investments. Because this type of investment is not public, there are no brokerage commissions required by PEIT companies which save investors’ money on every transaction.
- Drawback # Two, lack of transparency – Because private equity transactions do not involve brokers and stock exchanges like public markets, there is no transparency regarding the valuation of assets or liabilities on a specific company’s balance sheet. This makes it difficult for investors to assess the health and value of an investment without high-level financial expertise, which can be costly and time-consuming if you need help with your assets.
Although PEIT has more benefits than drawbacks, it’s still important to consider all the pros and cons before investing. Here are some resources for more information on private equity IT challenges.
Private equity IT can help get your company off the ground, but not every private equity IT opportunity is right for you. Ensure that you’re aware of all risks before investing in anything. Luckily, there are many online resources about this topic if you want more information on what it entails or how to apply these principles yourself. The pros and cons listed here will help guide your decision-making process towards choosing the best option for your business needs.
