Private Equity Participation
Equity participation refers to the ownership of shares in a company or property. Equity participation may involve the purchase of shares through options or by allowing partial ownership in exchange for financing. The greater the equity participation rate, the higher the percentage of shares owned by stakeholders. Allowing stakeholders to own shares ties the stakeholders’ success with that of the company or real estate investment. In this case, a more profitable company will provide stakeholders with greater gains.
Fund Raising Private Equity Investment
We Uplaxya Consultants Pvt. Ltd. is Expert to find raising, Private equity fundraising refers to the action of private equity firms seeking capital from investors for their funds. Typically an investor will invest in a specific fund managed by a firm, becoming a limited partner in the fund, rather than an investor in the firm itself.
Equity participation is used in many investments for two primary reasons. First, it is used to tie the financial rewards of executives to the fate of the company, increasing the likelihood that executives will make decisions that will improve company profitability. This type of compensation may be delayed, reducing the possibility of executives making short-term decisions to boost the share price. Workers, not just executives, can also be offered equity by companies as a form of employee retention and work incentive. This typically is in addition to base salary and bonuses they receive.
Fund Raising Private Equity Investment
Our years of experience have shown us that private equity deals can provide large amounts of funding to company owners looking for a return on their shares and an injection of cash to accelerate growth. Often, in the right circumstances, private equity investment can provide significantly higher value to a company owner than a traditional trade sale.
This is due to private equity houses having large amounts of funding available, and continually being on the lookout for companies with growth potential. With private equity investors being no stranger to the M&A market, they know how to identify such growth potential, and will often be willing to pay higher values for businesses that they feel will generate significant returns in the future.
Private equity houses typically invest in companies for a long period of time; this can be up to five, ten, or even twenty years.
A long investment horizon can benefit a company in a number of ways. The main reason being that the investor will use their time wisely to create a careful strategy, seeking to minimise risk and preserve capital.
The patient approach that most private equity houses employ ensures that final value is extracted from the company at the right time; when the market or sector is at its strongest, at a time when investors or acquirers are drawn to the opportunity.
Uplaxya Consultants Pvt. Ltd. Guide to Private Equity states that private equity backed companies have been shown to grow faster than other businesses; a 2012 study by The Boston Consulting Group provided supported this, by finding that more than two thirds of private equity deals resulted in the company’s annual profits growing by at least 20%.
These impressive returns are due to one factor; private equity investors are highly skilled at what they do. Most investors have years of experience within the field, and so you can guarantee that your business will be in capable hands post-investment.
Although private equity investors tend to take ownership of most, or all, of your company’s shares, they don’t always take a direct role within the business, allowing you to remain within the company in a managerial role, with the added benefit of additional financing and expert guidance.
Many investors will help you to develop a clear strategy and stable growth plan at the offset of their investment period, then take a back seat in the actual delivery of the strategy as they allow you to manage your business on a day-to-day basis. Therefore, selling your business to a private equity firm doesn’t necessarily mean that you will be employed by someone else.
Even though selling a portion of your shares to private equity will leave you with less value at the beginning, within a few years your shares should be worth considerably more than the whole company was worth prior to private equity investment.
The private equity investor has funds tied up within your business, meaning that they want and need your business to succeed in order to generate a return. This incentive will ensure that they are wholly committed to ensuring the success of your company over the course of the investment period.
Private Equity Participation Frequently asked questions (FAQ)
- What is private equity?
- What is the diffrence between private equity and venture capital?
- What are the private equity data sources for investment, fund raising and profiles informations?
- What does a private equity investor look for when making an investment?
- Who invests private equity?
- Why would company a want private equity invesment?
Private equity is finance provided in return for an equity stake in potentially high growth companies. However, instead of going to the stock market and selling shares to raise capital, private equity firms raise funds from institutional investors such as pension funds, insurance companies, endowments, and high net worth individuals. Private equity firms use these funds, along with borrowed money and their own commercial acumen, to help build and invest in companies that have the potential for high growth.
As soon as a private equity house completes an investment, often before, it will sit down with the company’s management team and work out the best strategy to take the business forward and drive growth. This method of working side by side – of private equity backer sitting down with management – is fundamental to why private equity is such a successful way of building a business.
This ‘active ownership’ stands in contrast to public companies, where there are often hundreds or thousands of different shareholders. In private equity, the investors will generally own a controlling stake and are directly involved in the running of the business. A plan may include seeking out and entering new markets for growth, product development and innovation, training of management teams, improving procurement and the efficiency of supply chains, making acquisitions, strengthening financial controls and operating systems and preparing a company for exit.
By having a much shorter reporting line between investor and company management team, it ensures the interests of the two are very much aligned. Both the private equity house and the management team are motivated by the same goal – to increase the value of the business. By keeping the reporting lines short, private equity has a strong incentive to be actively engaged in the running of a company.
The private equity data sources for investment, fund raising and profiles include quarterly surveys of private equity firms; government filings; public news releases; and Thomson reporters – writing for the Venture Capital Journal (VCJ), European Venture Capital and Private Equity Journal (EVCJ), Private Equity Week and Buyouts Newsletter – who gain access to private equity newsmakers and ensure that breaking news filters into the private equity database
The ultimate aim of private equity investors is to create value. As such, they look for high quality management teams with a credible plan to grow their business. Private equity investors are long-term investors and work with the company’s management to improve the company’s performance and strategic direction by aligning incentives, improving business plans, making operational improvements and strengthening corporate governance. With this mentality to buy and help build, coupled with a disciplined approach to organisational governance, private equity investors display a nimbleness and adaptability that raises the value of their investment and ensures that value can be realised in the future.
The ultimate aim of private equity investors is to create value. As such, they look for high quality management teams with a credible plan to grow their business. Private equity investors are long-term investors and work with the company’s management to improve the company’s performance and strategic direction by aligning incentives, improving business plans, making operational improvements and strengthening corporate governance. With this mentality to buy and help build, coupled with a disciplined approach to organisational governance, private equity investors display a nimbleness and adaptability that raises the value of their investment and ensures that value can be realised in the future.
The attraction of private equity investment to a company and to the management is the opportunity for managers to own a significant portion of their business. Aligned interests between the managers and the investors fosters the sense of ownership that is central to the concept of private equity investment. Besides the infusion of capital, companies also benefit from the experience and insight that fund managers bring to the board room.
