Private investors do not just invest simply because they want to get the money that would be given to them on a regular basis, but they are also doing this as a plan for their future when they will be ready to end their connection with the business and receive a lump sum as their greatest financial reward. Lump sum amount differ depending on how much the investor gave when he is still beginning to do his investment.
Exit strategies and what you need to know
A Although private investors have a lot of exit routes to choose from when they want to end their involvement in business, each route has its own advantages and disadvantages such as:
The process of flotation for the public
All about trade sale
What is management buyout?
Staff members and key individuals are given a chance during a management buyout to secure their finances by purchasing a part or all of the interest that is held by the investors or the business owners. If the investor will be allowed to retain a minority of the stocks, he can still be able to receive income for a few years that is why this is considered as an attractive option, considering that the people who will be handling the business are those who are already familiar with the market so there is an assurance that all future revenues will be maximized.
Rather than being an employee, the manager can now be the owner because of a management buyout, however, it is not easy to calculate the value of an investor’s share, provide the buyout plan of the business, and maximize sale price for the investment that is why many things are really at stake here. There are several different factors that might be able to affect the price that can be greatly achieved for this that is why it would be best for a private equity investor to make sure that a step is being taken in trying to control as many of these disadvantages as possible with regard to the investment. Some of the factors that can greatly affect the price that the investor will be able to come up in proposing for the disposal of his investment includes:
Providing the right information
In order for a private investor to maximize the return of his investment, he should make sure to come up with a good exit strategy such as acquiring some information about how the business had been functioning well through the years, and the projections and prosperity of the business for the future as well.
What are the exit strategies of other shareholders?
It is important that a private investor is able to convince other investors to sell their shares together with him since this will surely increase the value of the stocks. However, if these other investors are willing to sell their stock to just one shareholder, then the value of an investment of the private investor will surely depreciate.