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Private Equity Investment

On some occasions,  a company desires to sell a part of its interest to a Private Equity Firm. For Example, the company has identified a quick business opportunity which is time sensitive, has a fund requirement which the company cannot afford in normal course of business through equity and debt and will take long time to acquire through internal plough back by which time the opportunity would have evaporated. Software, telecom, web based mobile applications, pharma formulations , medical data related business are such types of areas where technology evolve so rapidly that any delay in seizing the opportunity would make the technology obsolete and conventional borrowing would not be able to feed the process because of stringent terms and delayed processing. Market advantage in such cases depends on timely availability of requisite funds. Private Equity is a hot choice in such cases.

The company is in serious requirement of fund because of Asset - Liability mismatch or because of temporary financial crisis or because of need to pay back some borrowing non payment of which may cause serious disruptions and sale of assets to unlock value has not materialized. Nonetheless, the enterprise has value and the stake can be hived off to a Private Equity Firm for mutual advantage. A private equity firm may evince  interest in a company on the condition that the company puts in place a new management team  which ideally will improve operating results and drive profits.

 Another feature of these private equity transactions is their extensive use of debt in the form of high-yield bonds. By using debt to finance acquisitions, private equity firms can substantially increase their financial returns. The debt used in buyouts has a relatively fixed cost, so if a private equity fund's return on assets (ROA) is greater than this cost, the fund's return on equity (ROE) is higher than if it hadn't borrowed money. The same principle applies in reverse, however, making these leveraged buyouts potentially very risky; if the acquired company's ROA is lower than the cost of the debt used to buy it, then the private equity fund's ROE is less than if hadn't used debt

We at structure the deals that involve lenders, new stake holders , underwriters (such as investment banks),  and  use our extensive industry contacts to ensure that the deals are closed with maximization of gains or minimization of loss. We focuse on linking growth equity investments in unlisted mid market companies that offer opportunities for value creation and enhancement. Pl. contact us.