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. There are different exit strategies that investors make use of that is why the amount of lump sum will depend on this.
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:
What is meant by public flotation?
All about trade sale
What is management buyout?
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.
Working out the value that the business needs and pro-rating this is such an easy job compared to calculating the share of the investors, maximizing the sale price so that there will be more income to be shared, and making sure that the price will be right for the business. 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. 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
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.