Requirements For An Attractive Private Equity Investment

Private equity firm investment is a profitable affair attracting investors from all around the world. It is basically a pooled investment where different advisors come together and pool the invested money by various investors and make an investment on behalf of that fund.  Every private equity firm India has a certain set of investment standards or criteria which a company needs to meet in order to be eligible. Investment criteria are a set of the parameter used to measure an investment opportunity. Hence, it becomes necessary for you to know all the basic criteria which can make your company take advantage of private equity fund investment. Here are some of the main things to keep in mind-

Strong Management Team- It is the most important aspect of an attractive private equity investment.  Strong management teams have excellent leaders and industry experts.  Most private equity firms do a complete background check and evaluation before making any important investment. Hence, the quality staff is very important to attract investors.

Strong Market Position- Private equity firms have a tendency to invest in market leaders.  Moreover, any business which wants to invest in private equity look out for the same quality. Hence, having valuable products and meaningful propositions is necessary, not just for the growth of the business but from the private equity point of view as well.

A well- Defined Growth Strategy- The best way to attract a private equity firm into your business is to have a well-defined growth strategy. Companies which have a greater growth aspect are instant eye-catchers of equity firms. The main points to discuss are – 

a) Targeting customers for specific products.
b) Selling the existing products in new customer markets and geographical regions.
c) Launching new products.
d)  Taking over other businesses and enhancing new opportunities.

Attractive Customer Dynamics- Happy customers are an indication of a growing company.  Moreover, private equity firms always prefer companies with satisfied customers. When customers are happy, they leave positive feedbacks and responses which help in building credibility and hence act as a bonus in terms of private equity investment.

Predictive Earnings- The ability to predict future revenues creates more confidence and is an indicator of ongoing growth. Moreover, companies with constant sales cycles, multi-year contracts, and recurring subscription revenues appear most attractive to private equity firms.

Limited Operational Risks- Operational risks are one of the most important deciding factors in terms of private equity firms.  Companies with no substitutes in terms of suppliers are usually riskier. Companies with nothing to manage its internal processes such as sales, customer service, marketing, IT etc. are also unfavorable in terms of private equity fund investment.