A Deep Understanding Of Private Equity Investment

Private equity is the investment made in private companies or publically listed companies which become private as a result of investment by a single firm or multiple firms. An investment in PE funds can be a very safe and secure to make some prominent profits. It requires proper strategy so that it can turn out to be fruitful in near future. The strategy is planned in various stages which can be planned according to the situation a company is in. The planning is done in stages like the target companies, the sectors for investment, the target geographies, the sectors for investment, and the Added value to the firm.

Types of equity:

Venture Capitals: This type of investment is done in the companies and product which are promising for the future and require an investment in the company. This kind of investment follows a well defines strategy and usually private equity firms in India like to follow this particular approach as it yields good results.

Growth Equity: It is an investment in private equity so as to develop the business to new verticals and expand the growth of the company. This is generally done in growing companies which have gone through its basic phases.

Buyouts and distressed investing are the stages of investment where firms earn more money. Distressed companies are bought out with some investment from firms and some on loan from banks which is paid back from asset liquefaction and cash flow out of the company.

The three major stages of strategy for a private equity firm are:

Fund’s Target Sector

Private equity firms have to realize the basics of investment and target the sectors which are about to grow most in the coming decade. The major sectors for the growth are healthcare, insurance, and technology or real estate in India.

Value Added by the Firm

The firms are an existing business organization in themselves which can guide a new company with its business development. A particular expertise in any field of the firm helps it decide the specialty of the sector they want to invest in.

The Geographical Target

The firms have to realize that what part of the world is most suitable for the type of business they are investing in. The technical companies need to be in big cities while the investment in tourism has to be in the suburbs. The firm which decides upon this swiftly is a profitable organization.