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Basics of Private Equity Investing
In the few years, the number of private equity transactions have seen significant rise due to several reasons. Technical development, regulatory changes, and other economic sectors are some reasons that fuelled this growth. After the subprime mortgage crisis and other global recessionary trends, private equity investments have seen drastic reductions. Most funds that invested during the early years of 2000s have seen the value of their investments being eroded with many funds not being able to exit due to stressed economic conditions. However, as the economic situation improves, funds have restarted investing in select sectors http://www.huffingtonpost.com/shane-paul-neil/big-data-bigger-breaches-_b_6109928.html.
Private equity funds can be sector agnostic or sector focused like Monument Capital Group Holdings. Sector specific funds offer significant benefits to the investee companies because the partners have several years of industry experience.
This can be useful in developing new strategies for growth or to increase the number of clients. Most of the private equity funds procure board representation with certain affirmative rights to safeguard their investments. Unlike debt funding, private equity investments are not offered against hard securities making these riskier. The managers at the various PEGs undertake a detailed analysis of the business plan and other aspects of the companies before making an investment decision.
The entire transaction takes between twelve to sixteen weeks and can be classified under different categories based on the specifics of every business. The managers will evaluate the entire company before making a presentation to the investment committee. The IC then accepts the recommendation following which a term sheet is offered.
The next step is a due diligence to ensure all information provided is accurate. Once this process is complete, definitive agreements are executed. Most funds like Monument Capital Group invest for a period of three to five years before exiting through an IPO, management buyout, or strategic or financial sale.