Key differences between buyout, turnaround, and growth equity funds in private equity
Private equity funds play an increasingly relevant role in mergers and acquisitions (M&A) transactions. However, they are often grouped under the same category without distinguishing between their different strategies. At Deale, as the platform dedicated to the purchase and sale of SMEs, we explain the main differences between the three most common types of private equity investment funds: buyout, turnaround, and growth equity.
- Buyout funds
Buyout funds invest in mature, stable, and profitable companies with the aim of acquiring a majority stake — usually full control — to drive growth or consolidation. They target well-functioning businesses with potential for further expansion.
An example in Spain is Pastas Gallo, acquired by ProA Capital in 2019, in a transaction that clearly illustrates this type of strategy.
Investment horizon: 5–7 years
Goal: Increase the company’s value and sell it to another fund, a strategic buyer, or individual investors.
- Turnaround funds
Turnaround funds specialize in distressed companies facing financial, management, or market-related problems. They take on a higher risk profile but with potentially greater returns. Their role is to step in, restructure, and reposition the business to rescue it and make it viable again.
A paradigmatic example is General Motors, which was rescued by private equity funds after filing for bankruptcy in 2009.
Focus: Aggressive restructuring and recovery
Return: Very high if the turnaround is successful
- Growth equity funds
These funds invest in growing companies that have already validated their business model but need capital to scale. Unlike venture capital, their focus is not exclusively on technology, and they do not usually seek majority control. They provide capital and strategic support while maintaining less involvement in day-to-day operations.
A notable example is Spotify, which in 2016 received $1 billion from TPG and Dragoneer prior to its IPO.
Goal: Accelerate growth without replacing the founding team
Typical exit: Sale of the stake after around 5 years
There is no universally “better” fund — it depends on your company’s stage and needs:
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