Have you heard about private equity in the recent past? You will note that this kind of investment has gained a lot of popularity recently. However, what is private equity? This basically refers to the kind of equity investment in those assets that cannot be freely traded on the stock market.
It is important to note that there are various forms of private equity. These include: angel investing, leveraged buyout, venture capital and so on. You will note that private equity funds are basically set up as limited partnerships. These partnerships are normally controlled by private equity companies. Here, it is imperative to remember that the private equity companies are the general partner in the limited partnership.
These private equity companies usually encourage individuals and even institutions to invest in the private equity fund. In this case the investors who have invested in the private equity fund become limited partners, and the general partnership controls the company management.
There are moments when the general partner thinks that a particular investment is feasible. In this case, it has to ask the limited partner to invest the amount it guaranteed. This way, the general partner usually chooses the investment portfolio of the partnership. The limited partner on the other hand will provide funds for investing. Here, the investor will enjoy profits through sales, mergers, recapitalization or even through an initial public offering. What should you know before investing? You should know a number of tips. These include:
1. Know the good and the bad
Most people would like to talk to the most successful portfolio companies out there in order to get insights. However, this is not always the right way. You should also consider those companies that have not been doing well in the recent past. Why? Well, this can help you get a better idea and scoop of the firm and know the one that you will work with.
2. Ensure that you know your market
It is important that you know your market better than anybody else. Also, and this comes without saying really, you should know the investment firm that you are working with. You should know the anticipated growth, the current and even the forecasted trends. In addition, you should know your competitors. In this case, you can consider investing in analyst research if you have some resources. This can help you know where the industry is going.
3. Get organised financially
Ensure you are organised financially so that you are able to delve further into your own business practices. You will note that you will be able to accurately forecast revenue growth and thereby enable you to demonstrate and even explain why your company is a good investment.
If you are looking for an adviser in private equity investment you should consider Goodwin. The good news is that the team usually advise their clients who want to invest in this area.
For more information please check out Goodwin’s website here!