Lump sums are given to people who have been investing in the business for a long period of time but would want to end their involvement already and this is considered as one of the greatest financial rewards for private investors. At this stage, the amount of money that an investor is going to get will depend on the exit strategy that he is able to come up with.
A list of exit strategies
A There are some advantages as well as disadvantages of the exit routes that private investors may be able to choose from, which includes:
The process of flotation for the public
All about trade sale
How does management buyout work?
A management buyout is considered as a form of acquisition wherein the company’s existing managers are given the chance to acquire a large portion or all of the company from either the investors or the business owners. This is considered as an attractive option especially if the investor will still be allowed to become a minor shareholder so that he will still be able to receive some shares for a number of years since the management of the business will be passed on to people who can be trusted and are familiar with the setting of the business in the industry therefore all future revenues can 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. From the outset of the investment, a private equity investor should take steps to control all of the disadvantages that he might have to face since there are a number of different factors which can greatly affect the price that should be achieved. 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
The prosperity and projections of the business for the future, as well as how the business is able to function effectively are some of the important information that a private investor should be able to come up with in making his exit strategy to ensure himself of getting a huge amount of money as a return for the investment that he made.
Did the other shareholders have an exit strategy?
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.