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. Lump sum amount differ depending on how much the investor gave when he is still beginning to do his investment.
Exit strategies and what you need to know
A Private investor has different exit ways to choose from which has its own advantages and disadvantages. Here are the most common ones:
What public flotation is
What is the meaning of trade sale?
What process do you need to follow when you do management buyout?
A management buyout is known as a transaction of which the company’s management team will be given the chance to purchase the operations and assets of the business that they are managing. 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.
You may think that doing all this is easy, but calculating the value of the share of an investor in the business, maximizing sale price of an investment, and putting up a price for selling this business is a lot more difficult than just coming up with the correct figures to keep the business running. 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
If an investor is able to come up with more positive information about how the business is able to function well as well as the projections and prosperity of the business for the future, he will surely have a better plan for his exit strategy and for getting back a large amount of his investment.
Did the other shareholders have an exit strategy?
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.