Principle of Fund operation
Private equity fund investing in promising sectors, defining its investment strategy by acquiring significant, including the control, shareholdings and taking an active part in the management.
The main activity of the Private equity fund is long-term investment in the form of incorporation of enterprises, the acquisition of shares in companies, as already issued and new shares (the additional issue, the proceeds of which remain in the company):
- There are combinations of these options, depending on the needs of the company in financing
- Perhaps the so-called hybrid financing (in the form of debt instruments convertible into shares, and so forth.)
Direct Investment Fund carry out their investment activities in accordance with the declared investment strategy, which includes a specialization in certain sectors and regions, subject to minimum and maximum size of the investment, the size of the acquired share (shares), the level of participation of the fund in the activities of investment objects, and so on.
Income of Private equity fund depends on the development of its portfolio of investments, so the classic private equity funds are interested in the stable development of its portfolio companies and creating value through active participation in the activities of these companies, together with management and existing shareholders.
Traditional investment horizon for fund is from 3 to 7 years. At the end of this period, the fund can realize its investment in the company trough IPO, or by selling its stake to the other shareholders, the company itself, or external investors.
The main benefits of a partnership with Private Equity Fund
Source of financing
- The company or its shareholders access to equity financing in a relatively short period of time (eg, compared to the IPO, preparation for which can take from six months to several years). This funding does not imply a diversion of funds for the repayment of liabilities and interest payments, which is especially important for the ‘young’ fast-growing companies
- “Private” nature of funding – as opposed to debt financing or IPO, the fact of partnership with the Fund (in particular the details of the partnership, the value of the company, the size of the package, etc.) may be confidential (at the request of the parties)
- Additional features to attract debt resources (due to the increase in equity)
“Mark of Approval” / Image Component
- The fact of partnership with the fund traditionally considered by its partners, contractors and clients as a positive signal, indicating recognition of management and shareholders achievements, business sustainability and the effective business model – “… if highly qualified financial experts have given to Company their money, it can be trusted. .. “
Expertise / Independent view from the outside
- Working in various sectors and regions, the team of the Fund and its experts have a wide experience in business process optimization, restructuring (legal, tax, operational), conducting industry consolidation and expansion through the acquisition of other players, strategy development, fundraising, concluded the company’s capital markets (IPO, Eurobonds, credit linked notes) and others.
- The funds have an extensive list of highly recommended experts / consultants from various fields that may be involved at some point in order to achieve short-term or long-term objectives of the company
- As an active shareholder, the Fund monitors the activities of management in relation to the interests of all shareholders
Scheme of The Fund working process