Private equity

Private equity is a form of financing that enables unlisted private companies to obtain the equity needed for their development.

The capital injection takes the form of a temporary minority participation. Remuneration is essentially the capital gain generated when the holding is sold and the expected return must be commensurate with the risk assumed.

FEMIP finances private companies by providing equity or quasi-equity funding (participating or mezzanine loans) from its budgetary resources. These operations are aimed for the most part, but not exclusively, at small and medium-sized enterprises.

As part of its support activity, FEMIP also deploys risk capital resources via participating loans to certain micro-credit associations.

Private equity operations present a number of features:

• Governance: the EIB's hands-on approach to individual investment leads to the application of best market practice (often EU standards) in the areas of financial discipline and governance.
  
• Leverage: the Bank is always a minority investor, committing at a very early stage to the projects that it finances. Through its early involvement, the Bank is often able to attract other sources of funding.
  
• Sustainability: Private equity operations are designed to support profitable ventures creating value added and jobs. The achievement of an expected return commensurate with the risk taken is a sine qua non for each investment decision by the EIB.