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ADVANTAGES OF INVESTMENT IN PRIVATE EQUITY
• INTRODUCTION
• BAD PRESS SURROUNDS PRIVATE EQUITY. THERE IS A PERCEPTION THAT PRIVATE EQUITY FIRMS ARE ACQUISITION COMPANIES THAT WILL PURCHASE YOUR COMPANY, DISASSEMBLE IT, AND THEN SELL THE COMPONENTS. WHEN THERE WERE JUST A FEW ENTERPRISES, IT MIGHT HAVE BEEN THE MAIN STRATEGY AT ONE POINT. HOWEVER, THE NUMBER OF PE COMPANIES HAS SKYROCKETED, AND THEIR DEVELOPMENT TACTICS HAVE SIGNIFICANTLY CHANGED.
• IN THE LOWER TO MIDDLE MARKET TODAY, PE INVESTORS ARE AIMING TO INCREASE THEIR PRIVATE EQUITY PORTFOLIO VIA ACQUISITIONS. THEY OFTEN WON'T INVEST IN A FIRM UNTIL THEY CAN ADD TO AND SPEED UP THE COMPANY'S DEVELOPMENT POTENTIAL.
FURTHERMORE, PE COMPANIES ARE KEEPING THEIR ASSETS FOR LONGER, SOMETIMES SEVEN YEARS OR LONGER. THIS EXTENDED TURN-AROUND TIME GIVES SELLERS THE PEACE OF MIND THAT THEIR PERSONNEL WILL CONTINUE TO PLAY A PART IN NEW VENTURES AND POSSIBILITIES FOR DEVELOPMENT FOR SEVERAL YEARS.
HERE ARE REASONS PRIVATE EQUITY IMPROVES THE VALUE OF YOUR COMPANY:
• INFLUX OF MONEY
• PE FIRMS HAVE SUBSTANTIAL FINANCIAL RESERVES AND ARE CAPABLE OF SUPPLYING FUNDS NEEDED TO SUPPORT EXPANSION. THESE COMPANIES COULD PROVIDE THE MONEY REQUIRED TO FINANCE FACILITY RENOVATIONS, THE PURCHASE OF NEW EQUIPMENT, OR PERHAPS THE START OF A MARKETING CAMPAIGN. YOU NEED MONEY AT EVERY STEP OF RUNNING A COMPANY, WHETHER YOU'RE JUST STARTING OR ATTEMPTING TO SELL YOUR CONCEPT FOR THE FIRST MOMENT, GROWING, EXPANDING, SUFFERING, OR HEAVILY IN DEBT. • EVERYTHING THAT PROMOTES CORPORATE DEVELOPMENT, INCLUDING R&D, SUPPLY CHAINS, MARKETING, ATTRACTING AND RETAINING COMPETENT STAFF, AND SMART PROCUREMENT, NEED FUNDING, DON'T THEY? NOT TO ADD THE AMBIGUOUS CIRCUMSTANCES, LIKE THE EPIDEMIC, WHICH CHANGED EVERYTHING SUDDENLY AND PLUNGED SOME BUSINESSES INTO A PIT OF UNCERTAINTY ABOUT HOW THEY WOULD EVEN MANAGE TO PAY THEIR EMPLOYEES' SALARIES, BILLS, RENT AS WELL AS OVERHEADS WHILE PREVENTING THEMSELVES FROM COLLAPSING.
EXPERTISE • THE SKILLS THAT YOUR COMPANY IS MISSING MIGHT BE PROVIDED BY PRIVATE EQUITY. YOU MAY REACH NEW BUSINESS OBJECTIVES AND INCREASE COMPANY VALUE WITH THE ASSISTANCE OF THESE OFTEN HANDS-ON GROUPS. THEY PROVIDE PROFESSIONALS THAT ARE WILLING TO GET THEIR HANDS DIRTY AND WORK WITH YOU, WHETHER IT'S TO BEGIN ONLINE DISTRIBUTION, WIN A GOVERNMENT CONTRACT, OR MEET ANOTHER CRITICAL DEMAND FOR YOUR COMPANY.
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• CONNECTIONS • ANNUAL MASTERMIND MEETINGS ARE HELD BY SEVERAL PE ORGANIZATIONS. THESE WORKSHOPS, WHICH ARE INTENDED FOR CEOS AND BUSINESS EXECUTIVES, PROVIDE A CHANCE TO EXCHANGE BEST PRACTICES AND LEARN ABOUT RECENT DEVELOPMENTS. THE PROPER PE COMPANY MIGHT LEAD YOU TO A NEW NETWORK OF PEERS AND BENEFICIAL BUSINESS CONTACTS. • INCENTIVES FOR MANAGEMENT • PRIVATE EQUITY BECOMES AN OPTION TO REWARD THE MANAGEMENT TEAM IF YOU'RE WANTING TO DO SO. PE INVESTORS WANT TO BE CONFIDENT THAT YOUR EXPERIENCED MANAGEMENT TEAMS WILL REMAIN IN PLACE. TO DO END, THEY FREQUENTLY OFFER EQUITY AND BENEFICIAL INCENTIVE SCHEMES.
• TESTED RESULTS • PRIVATE EQUITY COMPANIES EXCEL AT ADDING VALUE. ACCORDING TO A SURVEY BY BOSTON CONSULTING GROUP, MORE THAN HALF OF PRIVATE EQUITY TRANSACTIONS RESULTED IN BOUGHT BUSINESSES SEEING YEARLY PROFITS OF AT LEAST 50 PERCENT AND TWO-THIRDS OF THEM GENERATING AT LEAST 20PERCENTAGE GROWTH. IN THE UNITED STATES DURING THE LAST 20 YEARS, PRIVATE EQUITY HAS OUTPACED EQUITIES BY 4 PERCENT FOR INVESTORS. • DETERMINATION TO SUCCEED • THE SUCCESS OF YOUR COMPANY IS IMPORTANT TO PE FIRMS FOR THEIR REASONS. YOU CAN COUNT ON A PE FIRM'S DEDICATION TO MAKING SURE THE FUTURE OF THE COMPANY IS PROSPEROUS IF THEY BUY OR INVEST IN IT.
• DETERMINATION TO SUCCEED • THE SUCCESS OF YOUR COMPANY IS IMPORTANT TO PE FIRMS FOR THEIR REASONS. YOU CAN COUNT ON A PE FIRM'S DEDICATION TO MAKING SURE THE FUTURE OF THE COMPANY IS PROSPEROUS IF THEY BUY OR INVEST IN IT. • CONCLUSION • THERE CONTINUE TO BE "BAD EGGS" WITHIN THE PE MARKET, AS THEY ARE IN ANY SECTOR, BUT RATHER AN M&A ADVISER MAY ASSIST IN SCREENING THE LONG-SHORT PORTFOLIO MANAGEMENT TO ENSURE YOU'RE DEALING WITH A REPUTABLE TEAM.
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