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The After math of a Private Equity Investment

The Private Equity infuses funds in a company against a stake in its business and returns at the time of its exit

The after math of a PE investment varies depending on the nature of the deal

1)     In most cases, a PE would like to introduce its member on the Boards/Management of the target company to ensure business growth

2)     In case of a plain vanilla investment where PE acts as a passive investor, nothing much happens in the target company

3)     In case of a distressed investment, a lot of drastic changes can be expected in the target company

The PE, post infusion of funds will typically (not exhaustive list)

1)     Suggest any kind of operating improvements, business development or acquisition opportunities. 

2)     Set up governance measures like deciding the structure/members of boards & committees, thresholds of capital allocations in critical areas of business

3)     Initiate reporting process like monthly KPI reports, monthly milestone trackers, financial statements etc.

4)     Discuss and agree on annual budgets, business plans etc.

5)     Ensure critical positions in the company are filled. Review the existing employee base and undertake hiring/firing decisions

6)     The PE can leverage its own network and facilitate introduction of new suppliers, prospects, financiers to the target company

When the time for the exit comes close, the PEs get engaged in speaking to advisors for helping them find investors or run the process of IPO etc.

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