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 Private investor has different exit ways to choose from which has its own advantages and disadvantages. Here are the most common ones:
What is meant by public flotation?
What is the meaning of 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.
Working out the value that the business needs and pro-rating this is such an easy job compared to calculating the share of the investors, maximizing the sale price so that there will be more income to be shared, and making sure that the price will be right for the business. 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.
What are the exit strategies of other shareholders?
In case other shareholders are also interested in making their own exit, the value of the investment will surely increase, however, if they will decide on selling it to a single shareholder, then the value of the private investor will then be decreased because of the influence of other investors.