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.
Exit strategies and what you need to know
A Although private investors have a lot of exit routes to choose from when they want to end their involvement in business, each route has its own advantages and disadvantages such as:
The process of flotation for the public
What is the meaning of trade sale?
How does management buyout work?
Staff members and key individuals are given a chance during a management buyout to secure their finances by purchasing a part or all of the interest that is held by the investors or the business owners. This is considered as an attractive option especially if the investor will still be allowed to become a minor shareholder so that he will still be able to receive some shares for a number of years since the management of the business will be passed on to people who can be trusted and are familiar with the setting of the business in the industry therefore all future revenues can 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 are several different factors that might be able to affect the price that can be greatly achieved for this that is why it would be best for a private equity investor to make sure that a step is being taken in trying to control as many of these disadvantages as possible with regard to the investment. 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:
Gathering of information
The prosperity and projections of the business for the future, as well as how the business is able to function effectively are some of the important information that a private investor should be able to come up with in making his exit strategy to ensure himself of getting a huge amount of money as a return for the investment that he made.
What are the exit strategies of other shareholders?
There will surely be a devaluation of the investment of the private investor in case the other investors will choose to sell their stocks to a single shareholder. However, if the other investors are willing to sell their stocks together with the private investor, then the value will definitely increase.