Private equity
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Private equity is a particular form of asset that deals with equity securities of operating enterprises, which do not come under the list of companies traded publicly on stock exchanges.
Private equity adds to the operational competency of business organizations. It encourages private investment in business ventures. With private equity, it becomes easier for business organizations to focus on developing new products. Private equity also helps in designing new business strategies.
Private equity is a particular form of asset that deals with equity securities of operating enterprises, which do not come under the list of companies traded publicly on stock exchanges.
Private equity adds to the operational competency of business organizations. It encourages private investment in business ventures. With private equity, it becomes easier for business organizations to focus on developing new products. Private equity also helps in designing new business strategies.
Business organizations can attain high level of corporate governance through proper maintenance of private equity. It also comes in handy in case of risk management. Specialty of private equity lies in the fact that it provides the companies with funds even under unfavorable market conditions.
Private equity holders are provided with the following benefits:
1. Rights regarding anti dilution
2. Protection regarding down round
3. Eligibility to utilize funds for a specified purpose
Shareholders need to abide by the following rules of agreement:
1. Well-timed fulfillment of different types of regulatory necessities
2. To allow for timely evaluation of performance, sharing, disclosure
3. To arrange for internal and statutory auditors
Shareholders are subject to penal proviso in case they fail to abide by the terms and conditions of agreements.
Some of the basic features of private equity are as follows:
1. Private equity holders can enjoy the benefit of acquiring majority or minority stakes
2. Usual duration of stay of private equity holder in a business enterprise varies from 3 to 6 years
3. It takes around 3 months to complete a usual PE transaction
4. It has been found that companies that are funded by private equity get relatively more private equity multiple listing, than other non-private equity based companies at the private multiple
Success of a private equity fund crucially depends on how well the business venture is functioning. With private equity funds at their disposal, entrepreneurs can be rest assured for uninterrupted supply of resources.
