Private company

Unlisted companies account for the vast majority of companies worldwide. They play a central role in the economy and constitute the primary investment universe for private equity.

What is the difference between a publicly traded company and a privately held company?

The main difference lies in access to capital and the way shares are traded.

Publicly traded company

Stocks are traded on the stock market, and their prices fluctuate constantly based on supply and demand.

Investors can generally buy or sell their securities quickly.

Private company

The company's capital is held by a limited number of shareholders.

The shares are not freely tradable on an organized market, and purchases or sales generally require private negotiations.

Why does a company remain privately held?

Contrary to popular belief, not all companies are meant to go public.

There are several reasons for this choice.

Preserving independence

Current executives and long-standing shareholders may wish to maintain close control over the company's strategy.

Adopt a long-term perspective

Not being publicly traded often allows a company to focus on its growth without being subject to the daily fluctuations of the financial markets.

Reduce certain regulatory constraints

Publicly traded companies are subject to particularly stringent financial disclosure requirements.

Funding Growth in a Different Way

Companies can raise capital from private equity funds, institutional investors, or strategic partners without turning to the stock markets.

How do privately held companies raise capital?

Unlisted companies have several sources of financing.

Self-financing

The profits generated by the business can be reinvested in the company's growth.

Bank financing

Banks can provide loans to finance investments or growth.

Private Equity Investors

Private equity funds provide capital to support a company's growth.

Venture Capital

Innovative startups can raise funds from investors specializing in venture capital.

Why are private companies attractive to investors?

Unlisted companies account for a significant portion of economic value creation.

Exposure to the real economy

These companies operate in a variety of sectors, including technology, healthcare, manufacturing, services, and consumer goods.

Growth opportunities

Many companies remain unlisted for much of their development.

Active support

Investors can contribute to companies' strategy, governance, and operational development.

Unlisted Companies and Private Equity

Private equity involves investing in unlisted companies.

Private equity funds invest at various stages of development:

Venture Capital

Financing for startups and innovative companies.

Growth Equity

Support for fast-growing companies.

buyout

Investing in established companies to accelerate their growth or facilitate their succession planning.

The world of private companies is therefore at the heart of the private equity market.

How do you value a privately held company?

Unlike publicly traded companies, there is no continuously observable market price.

Investors use various valuation methods:

Market multiples

Comparison with similar publicly traded or recently acquired companies.

DCF Method

Discounting of expected future cash flows.

Comparable transactions

Analysis of valuations observed in recent transactions within the same sector.

These methods are used to estimate the fair value of the company as of a specific date.

What are the risks associated with privately held companies?

Risk of capital loss

Like any investment, the value of an unlisted company can go up or down.

Liquidity risk

The resale of equity interests is generally more complex than on public markets.

Operational risk

Performance depends directly on the company's ability to execute its growth strategy.

Private Companies and the Global Economy

The importance of privately held companies has grown in recent decades.

Many companies today choose to remain privately held for longer than they did in the past.

Some companies reach a valuation of several billion euros even before considering an initial public offering.

This trend partly explains the rapid growth of private equity and private markets worldwide.

History of Private Companies in the Investment Sector

Before the 1980s

Listed markets play a dominant role in the investment world.

1980s–2000s

The growth of private equity is gradually increasing investor interest in unlisted companies.

Today

Private markets are a major component of the economy's financing and are attracting a growing number of institutional and high-net-worth investors.

FAQ

What is a privately held company?

A privately held company is a company whose shares are not traded on a stock exchange.

Can you invest in unlisted companies?

Yes. Investors can access them directly or indirectly through private equity funds and other specialized investment vehicles.

Why do private companies attract private equity funds?

Because they offer opportunities for support, growth, and long-term value creation.

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Disclaimer: Investing involves the risk of capital loss. Past performance is not indicative of future results. The information presented in this article is intended solely for educational and informational purposes. It does not constitute investment advice or a recommendation to buy or sell any financial instrument.