How to Setup Your Own Private Equity Firm

“Private equity” (PE) is a type of investment, in which people invest in private companies or publicly traded companies that turn into private ones subsequently, due to private equity transactions. The stakes in these companies are mostly free from the rules and regulations of the federal securities and also the public market. Growth equity firms, leveraged buyout firms and venture capitals are all different kinds of private equity fund. Private equity funds are managed by a General partner and are funded by Limited partners. Today there are many successful private equity firms, but a lot of planning and assessing goes into creating one’s own private equity firm, below are few steps and strategies that one should think about before venturing into this business :-




•OUTLINE BUSINESS STRATEGY

Defining and outlining a business strategy is the most important and basic step, knowing and comparing your financial goals from other competitors and doing proper research about the market are some of the key steps that one should follow.

•SETTING UP

The second step is to write the business plans and strategies that one has come up with, which should include the cash flow that one is expecting, setting up the timeline of the funds, which is mostly around 10 years and general marketing plans about future investors and growth of the firm. Another important step includes establishing the firm and funds name, so all of these steps combined should be kept in mind.

•ESTABLISHING INVESTORS

Now that the initial steps are in order, it’s time to think about the legal structure of the fund, which includes the general partner who has the right to decide the investments of the fund and the investors will be the limited partners, who don’t have the right to choose the companies which will be the part of the fund. The general partners bear any additional losses within the fund while the limited partners only incur losses which are of their own individual investment. Setting up private equity funds in India is an attractive prospect for young investors.

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