Private Equity 101
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Private Capital, Private Equity & Private Debt
Fund accounting, Fund administration, Fund raise
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Private equity deals involving net asset value (NAV) typically refer to transactions in which a private equity firm acquires a portfolio of assets, such as a group of companies or a real estate portfolio, at a price based on the NAV of those assets. NAV per unit is calculated by dividing the net asset value (value of the assets minus value of the liabilities) by the number of units outstanding.

In a private equity NAV-based deal, the price of the assets being acquired is based on their NAV at the time of the transaction. This means that the price of the assets may vary based on fluctuations in their value. Private equity firms often use NAV-based deals as a way to acquire assets at a fair market value, rather than paying a premium based on the perceived future value of the assets.

Private equity firms may also use NAV-based deals as a way to acquire assets that are difficult to value, such as illiquid assets or assets with complex ownership structures. By basing the price on the NAV of the assets, the private equity firm can more accurately determine the value of the assets being acquired.

Private equity NAV-based deals can be complex and may involve a range of legal and financial considerations, such as due diligence, financing, and negotiations with the sellers of the assets. It is important for private equity firms to carefully assess the risks and potential returns of NAV-based deals in order to make informed investment decisions.
Dividend recapitalizations — or dividend recaps, as they are called — have become a fairly common trick in the private equity playbook. Last year, according to a Bloomberg report, companies borrowed around $80 billion — a record — to pay out dividends to their private equity owners. Critics say that dividend recaps too often leave companies without enough capital to withstand a business downturn.