Private Equity – How to Secure your Investment
Private Equity firms must have great knowledge and must initiate informed decisions to avoid the loss of investment. Still in the nascent stage in India, even the bigger firms are advised to tread with caution. The governance of the investee enterprises plays a significant role in the return on investment. Minimal negligence entails that the firms might lose significant sums of money like many did between 2005 and 2008.
However, experts forecast that 2017 is a comparatively good year for private equity firm in India. A majority of the firms are hopeful about this year as compared to last year. Here are few things to keep in mind before investing in firms.
Perusal of reports
It is a given that the investing enterprises go through the records of the potential investees. However, they must go through the quarterly, mid and yearly reports. These reports are a reflection of a company’s executions and operations. If you’ve already invested in a firm that isn’t performing properly, then it’s time to formulate a strategy and modify its operations.
Learn more about the firm
As a successful entrepreneur, you must read between the lines and judge the actual position of the companies you invest in. Their advocates might portray a situation where the position of the company might seem better than it actually is. Investing firms have learned in the past that the share prices have substantially fallen within a short time of their investment. Elaborate background research is not only mandatory, but a general practice in current times. Intelligent executives urge the investee companies to share reports on a regular basis and are accordingly advised to update operations.
Know when to Exit
Timing is the key, when it comes to making an exit. If you fail to extract your investment in time, you’re likely to incur huge losses. There is no advantage in waiting for prolonged periods and hope for the prices to rise again. It might mean higher losses when, alternatively, you can minimise the losses by de-investing when things look bleak. You may research on similar cases before exiting to ensure an informed decision.
Accept your fault
Business and ego have never walked hand in hand. It is absolutely necessary to realize your mistakes and make amends accordingly. Nothing can be gained by blaming the investee companies or the market regulators. Huge firms like Goldman Sachs have made huge mistakes in the past and lost significant sums. A strategic resolve against the problem will help your company to recover the losses. Inflexibility on the part of the equity firms leads to distrust and gradual loss of interest.
Verify the reports
Evasion from the realities is a common practice these days. While you may have hired firms to do background check and verify the reports, it is of much importance that your company’s executives do their ground work as well. Any negligence on your part might leave you in a situation when making amends in not possible anymore. The evaluation reports need to recheck for fraud and human errors.
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