Private investors do not just invest simply because they want to get the money that would be given to them on a regular basis, but they are also doing this as a plan for their future when they will be ready to end their connection with the business and receive a lump sum as their greatest financial reward. 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.
Different 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:
The process of flotation for the public
Investment in trade and 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. There is a targeted price that can be achieved when it comes to the amount that the business should have however, there are a lot of underlying factors which may not be able to make this possible that is why a private equity investor must make sure that he is able to take steps to control all of these disadvantages. The price of the investor with regard to the investment that he is going to dispose of can be greatly affected by a lot of factors like:
Making sure that all information that is to be reported is true and correct
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.