Think Like a Private Equiteer

As with every industry, it pays to understand the human factors in private equity to ensure your success. Since private equity is so “private”, the human dynamics of the investment process are especially important.
Haltiner Family Office Wealth Management actively manages its clients’ assets with foresight – across generations. We take a holistic approach, closely monitor the markets, anticipate trends and opportunities, and develop customized solutions. In this way, we protect the assets entrusted to us and create optimal conditions for their long-term growth at an appropriate level of risk.
Sustainable investing  in the financial sector.
Haltiner Family Office solution concepts for every portfolio of requirements, first we put our focuses on value-oriented, medium- and long-term Since our founding, our clients have benefited from a broad range of sustainable investment solutions – making us one of the young companies with many years of experience in this field.


In private equity, capital is a commodity. Sustainable returns require thought behind capital deployment. Whether it is financial engineering or adding tangible value to businesses, strategy is a key facet of the private equity investment process.
Institutional investors can obtain the entire spectrum of sustainable solutions from us. The range includes, for example, various equity funds in which sustainability aspects are an important criterion for the evaluation and selection of companies. Other strategies focus on trends such as changes in energy supply, scarce resources, new technologies and water. Investors can also participate in sustainable issues with structured products. In addition,
Haltiner Family Office manages individual sustainable mandates with structured products for they clients..


If there’s one theme that underpins the entire concept of private equity investing it’s structuring. The structure of an investment is what helps private equity funds achieve equity returns for debt risk.

Contrary to popular opinion, private equity firms are interested in risk mitigation first and value creation second. The private equity deal structure reflects this. In aggregate, the components of the deal should protect the private equity firm on the downside and incentivise the management team on the upside. This typically suits the risk profiles and expectations of each party.
Consequently, unlike venture capital, a private equity deal structure reflects more than just money for stake; there’s some sauce involved too. The following points discuss some of the components of a private equity deal that lead to the aforementioned risk and return profiles:

Theories & Ideas

Private Equity Deal Selection: Mostly Speculation?

Most private equity firms look to invest in only 7 to 10 portfolio companies over the 10-year life of each fund; fewer portfolio companies means more value-add per investee (a resource allocation argument). Keeping this in mind, it is quite important that each investment represent a great opportunity. One failed investment won’t necessarily bring the whole fund down, but it may materially impact overall returns. So, how speculative is private equity deal selection?

When a private equity firm evaluates a potential investee, firstly they prognosticate potential returns and the likelihood of meeting their target return (often 25%+ pa). If presented with five potential investees simultaneously, the question becomes, which investees will meet our target return and do we have the resources to engage them all. If resource constraints limit the number of simultaneous deals, focus is constrained to deals that present the most opportunity on a risk-adjusted basis.

However, even with very detailed analysis, many assumptions underpin all of this prognostication and in the end, private equity deal selection is all highly speculative. Moreover, even if there is a real science to assessing current deals against each other, how do you compare these deals to future deals. What would a firm do if presented with 10 great opportunities all at once? Would it invest in all of them if analysis showed they’d all meet the target return? There must be some thought given to private equity deal selection of tomorrow. Maybe the 10 great deals today will pale in comparison to the 10 great deals tomorrow. So, how does one decide that a deal today is one of the best opportunities that the firm will see over the life of the fund?

Of course, there is no real answer to this. I just wanted to bring this topic to light to show how subjective and speculative private equity deal selection and the investment decision really is. But, this is what private equity firms value themselves on; their ability to remove as much speculation as possible and to make essentially profitable decisions. On the other hand, maybe this discussion sheds light on why we’re seeing so many write-downs of late. Maybe funds were too busy trying to get their money out the door and weren’t focusing enough on the comparative value of future opportunities. Of course, everything is clear in hindsight.

Royce I. Haltiner

Comment (1)

  1. Hello World!
    11 February 2023


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