Post by account_disabled on Mar 5, 2024 0:15:04 GMT -5
The Equity Such large amounts of money of course come with strings attached. Here are some of the downsides of private equity funding DilutionLoss of Your Ownership Stake This is the big one. With the other funding options weve looked at the investment came at a cost but you still stayed in control of your company. With private equity you get much more money but usually have to give up a much larger share of the business. Private equity firms often demand a majority stake and sometimes youll be left with little or nothing of your ownership.
A much bigger trade and its one that many business owners will Country Email List baulk at. Loss of Management Control Beyond the money you can also lose control of the direction of your business. The private equity firm will want to be actively involved and as we mentioned in the previous section that can be a good thing. But it can also mean losing control of basic elements of your business like setting strategy hiring and firing employees and choosing the management team. Some of the other options involved relinquishing control but because the private equity firms stake is usually higher the loss of control is much greater. This is especially true when it comes to the PE firms exit strategy.
May involve selling the business outright or other options that dont form part of your plans. Different Definitions of Value A private equity firm exists to invest in companies make them more valuable and sell their stakes for large profits. Mostly this is good for the companies involvedany business owner would like to create more value. But a private equity firms definition of value is very specific and limited. Its focused on the financial value of the business on a particular date about five years after the initial investment when the firm sells its stake and books a profit. have a much broader definition of value with a longerterm.
A much bigger trade and its one that many business owners will Country Email List baulk at. Loss of Management Control Beyond the money you can also lose control of the direction of your business. The private equity firm will want to be actively involved and as we mentioned in the previous section that can be a good thing. But it can also mean losing control of basic elements of your business like setting strategy hiring and firing employees and choosing the management team. Some of the other options involved relinquishing control but because the private equity firms stake is usually higher the loss of control is much greater. This is especially true when it comes to the PE firms exit strategy.
May involve selling the business outright or other options that dont form part of your plans. Different Definitions of Value A private equity firm exists to invest in companies make them more valuable and sell their stakes for large profits. Mostly this is good for the companies involvedany business owner would like to create more value. But a private equity firms definition of value is very specific and limited. Its focused on the financial value of the business on a particular date about five years after the initial investment when the firm sells its stake and books a profit. have a much broader definition of value with a longerterm.