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 There are some advantages as well as disadvantages of the exit routes that private investors may be able to choose from, which includes:
The process of flotation for the public
Investment in trade and sale
How does management buyout work?
A management buyout is considered as a form of acquisition wherein the company’s existing managers are given the chance to acquire a large portion or all of the company from either the investors or the business owners. This option is considered to be very attractive to investors if there is a compromise of allowing the investor to continue in receiving money from the shares for a couple of years since the business will be passed on to people who are well acquainted with it, therefore, all future revenues will surely be maximized.
Rather than being an employee, the manager can now be the owner because of a management buyout, however, it is not easy to calculate the value of an investor’s share, provide the buyout plan of the business, and maximize sale price for the investment that is why many things are really at stake here. 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. There are a lot of major factors that can greatly affect the price that the investor could have for the disposal of an investment such as:
Gathering of information
In order for a private investor to maximize the return of his investment, he should make sure to come up with a good exit strategy such as acquiring some information about how the business had been functioning well through the years, and the projections and prosperity of the business for the future as well.
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.