The private equity capital market is sophisticated, and structuring transactions is limited only by the creativity of the parties to the transaction.
In analyzing potential equity capital placements, investors typically look for a competent, experienced, motivated management team; strong prospects for profitable growth; an attractive industry niche; a solid business plan with a well defined strategy; and an exit strategy.
Private equity placements provide capital at a critical time in a company's growth. Private equity capital provides companies the ability to maintain growth without going public, thus providing greater credibility for subsequent private financings, or the ability to command a better price in a more significant IPO in the future.
Placing private equity provides several advantages to raising of debt including:
- Strengthening of the company's balance sheet
- Ability to leverage the equity and access additional capital
- Additional human capital in the form of a partner
- No debt service requirement
Most importantly, raising private equity capital is less time consuming and attention diverting than an IPO.
October 2000
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