erakapitali

erakapitali (private equity) refers to capital invested in private companies or in public companies that are taken private, with the aim of enhancing value over a multi-year horizon and exiting through a sale, merger, or initial public offering.

erakapitali funds are typically managed by private equity firms and raised from institutional investors, sovereign wealth funds, pension funds, and high-net-worth individuals. Funds invest in portfolio companies, often taking active governance roles and using leverage to finance acquisitions. Common strategies include leveraged buyouts, growth equity, and mezzanine financing, with investment horizons of roughly four to seven years. Value is created through operational improvements, strategic realignment, and add-on acquisitions.

Portfolio companies may benefit from professionalization and networks, while exits occur through sale to strategic buyers, another PE firm, a public listing, or recapitalization. The private equity model supports SME financing and corporate restructuring but faces criticisms such as illiquidity, high fees, leverage-related risk, and potential impacts on employees.

Regulatory environments: in the EU and Estonia, private equity activities fall under financial-market regulation, with frameworks such as the Alternative Investment Fund Managers Directive (AIFMD) guiding risk management and reporting. Tax treatment and fund structuring vary by jurisdiction. In Estonia, private equity is linked with venture capital, development funds, and programs supporting SMEs.

Key performance measures include internal rate of return (IRR), total value to paid-in (TVPI), and distributed-to-paid-in (DPI), used to assess fund success and exit value.