A buyout fund is a fund that focuses on the merger and acquisition of target companies. Its investment method is to acquire control over the target company by acquiring the equity of the target company, and then carry out a certain reorganization and transformation of it, and then sell it after holding it for a certain period of time.
M&A fund is not a legal term in the strict sense, but a concept established by the market. It is a branch evolved from private equity investment funds.
A buyout fund is a type of private equity fund that is used to acquire companies and gain control over the target company. The common way of operation is that after the merger and acquisition of enterprises, through restructuring, improvement, promotion, etc., the company can be listed or sold, so as to obtain huge benefits.
Buyout funds are generally raised in a non-public manner, and sales and redemptions are conducted through private negotiation between fund managers and investors.
From the historical data, it generally takes 5 to 10 years for international buyout funds to withdraw from investment, and the annualized internal rate of return (IRR) can reach about 30%.
M&A funds not only reflect the characteristics of private equity investment funds, but also have specific meanings and connotations.
The difference between buyout funds and other investments
- Venture capital mainly invests in entrepreneurial enterprises, and the target of M&A funds is mature enterprises.
- Other private equity investments have no interest in corporate control, while buyout funds aim to gain control of target companies. Buyout funds often appear in MBOs and MBIs.