Benefits Associated with Private Equity Firms

Often founders of startup companies are not able to trust on conventional funding sources. Private equity is an alternative source of funding, provided by a stable foundation of long-term strong investors, like private or public pension plans, family offices, corporations, and charitable foundations.

Private investors are expected to bring attractive returns for their stakeholders i.e. corporate, partners, public compared to other traditional investments sources e.g., bonds, stocks, and cash equivalents. 

Benefits of Private Equity Funds in India 

The most pivotal benefits associated with private equity ownership, enabling the company to create value and realize capital benefit in a repeatable manner, include: 

• The cluster of expected company investments is immense for private equity. These are unchartered landscape of opportunity. They often invest in small companies that have just started out in their respective field of journey; they also invest in unconventional sections of huge corporations; they are more interested in investing on those listed companies that are not popular and mostly under estimated and under-appreciated in the stock markets.

• Private equity firms in India are quite articulate and invest in prominent resource for evaluating the potential of firms, to realize the risks associate and the ways to alleviate them. These firms often drill down from several potential companies to the one that has all the required potentials to attain growth.

• PE firms invest in companies to improve its potential and make it more valuable, over a couple of years, prior to ultimately selling it off to a buyer. This is what makes private equity firms patient investors, focusing on long-term performance targets.

• The management of the company, run by private equity funds, is answerable to an engaged professional shareholder with the right to act prudently to protect its shareholding.

• The fusion of this well defined accountability between shareholders and company managers, combined with the requirement for a realization says that the structure of incentive can associate with the valuable reward. Failure does not call for any reward.

• Such delineated accountability offers several benefits giving comfort to potential money lenders, enabling investments to yield the dividends.

Synopsis

Above said are some of the benefits, associated with private equity funds, offered by private equity firms in India to the start up businesses looking for long term benefits.