Private Equity and Investment
The source of funding of any project has great importance. This is so as no business deal or venture is possible without finance. Private equity investments are one such source of finance. These funds have assumed great importance and statistics prove that private sources finance new ventures at a gigantic rate, that is almost 25 times more than finances from other sources. Thus private finance givers have turned into excellent investors for new projects.
Private equity investors are investors who have a high net worth and asset value and have liquid cash available. These investors are the back bone of private equity investments. Last year 300,000 firms and enterprises were launched in the USA and nearly one seventh of this lot was financed by these equity investments.
Private equity investors have made a mark in the financial field and they have had a tremendous impact in the entrepreneurial market. It is estimated that that these investors fund anything in a range from $20 – $60 billion annually.
Private investors with money to spare generally keep their money and investments in non-public companies. Thus a equity investor will most likely make an investment for 3 to 7 years, in contrast to venture capitalists who invest in companies at the inception stage or launch and also for much shorter periods
Private equity firms will follow some parameters while making an investment,that will include a strong management team and the company’s ability to bring in profit. They will also look at the growth potential of the company and whether an investor’s capital is safe as well as good return on his capital.He will also look at the exit clauses in case the equity investor wants to get his investment out.
Thus Private equity is never in loss making companies. Private investors are there to get a good return on the money they have invested and as such they will track the profit graph of any company they invest in. The private equity investor will look for agreements that give him a share of the profit generated at the time of exit. This will be an important clause for him as he can use the profit to invest in some other company.