Part 1 - What Makes a Good Private Equity Investment?

What Makes a Good Private Equity Deal?

Private companies can carry more risk as an investment due to the lack of information available to public investors. This is part one of a two-part series that breaks down important factors to look for when evaluating a private equity investment.


Important Factors to Consider

Some important factors to consider when evaluating private companies as potential investments are:

  • Stable and Recurring Cash Flow - Positive free cash flow that is stable and recurs year after year
  • Value Creation Opportunities - Done through operational improvement, multiple expansion, or deal structuring
  • Sustainable Competitive Advantage - When buying a company with a competitive advantage, investors should fully understand the systems, processes, patents, people, or other sources of the competitive advantage and ensure it will continue as the company matures  

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