Private Equity Funding

This is a funding from the Private Equity Firms for the expansion of an entrepreneur on a very vast scale in national as well as international market, when its business model and idea have been firmly established. This amount of funding starts from atleast Rs.50 crore and it can go up to any amount.

Private Equity consists of investors who make direct investments in Large Private Sector Companies. Private Equity Firms normally come together to take over very large Private Companies which are in distress. Then they try to improve the performance of the Company by infusing strong Management and technical team and thereby improve the Financials of the Company in the hope of re-selling the Company to another firm or cashing out with an IPO.

Procedural Aspects For Private Equity Funding

1. A prospective client who is looking for some investors to invest in his project or new venture has to prepare a small write up of his business to be presented before the investors. He can include the following points in the said write up:

  • Company Profile
  • Promoters bio data
  • Management and the technical team of the Company
  • Company’s financials for the last three years highlighting the present sales and profit figures. ( Top Line and Bottom Line)
  • Present additional requirements of his funds
  • What the Company is going to do and how it is going to invest the additional inflow of funds
  • Percentage of Equity/preference/any other mode of holding which the Company is going to offer to the investors

2. Once this Detailed project is prepared the same is pitched before the prospective investors

3. Prospective investors will meet the promoter of the Company person to see his

  • Pro activeness
  • Confidence level
  • Integrity
  • Dedication and passion for the business
  • His Management and technical team
  • New ideas if any

4. The investors have their own panel of experts who study the document and give the consent within 7 days.

5. If the decision to invest in the client’s business is positive then further discussions will take place regarding the following aspects:

  • Phases of investments as to how the client needs the funds , at one go or in instalments.
  • Exit route for the investors with a term period of 4 to 5 years

6. Finally documentation part will be affected :

  • Detailed shareholders agreement will be prepared which includes the details of rights and duties of the client as well as the investor.
  • Term sheet is prepared which includes the investment pattern as well as the exit route for the investors.
  • Under Seed Funding and Angel Funding the investor may appoint a Mentor from his side to help the promoter.
  • Under Venture Capital Funding and Private Equity, one Board seat will be given to the investor for appointing a person on his behalf.