Private Equity Funds offer financial support to companies in their early stages of development, which have adopted promising strategies. The aim of a fund’s investment is to achieve a return of approx. 30% per annum.
The minimum amount that such institutions usually invest starts at around 2 M USD, although there are also funds on the market that specialise in low value investments ranging between 500,000 and 2 M USD.
Investments made by such funds usually take the form of a capital increase, although a combination of equity and debt is also popular, as it increases the tax effectiveness of the fund’s investment.
So as to secure its investments, private equity funds expect to have an influence over strategic management of the investment target, hold seats on the Supervisory Board and have a veto on key decisions having an impact on the future of the company.
Private equity funds realise returns on their investment through the sale of their stake to a strategic investor, existing shareholders or through floatation of the company on the Stock Exchange. The sale of shares can take place together with other shareholders.
The standard investment period of such funds ranges from 3 to 5 years. During this time, the fund becomes a partner of the owners of the investment target and together they ensure its rapid development. Very often investment funds bring with them knowledge and experience in managing company finances, organising sales as well as establishing the action strategy assumptions and can attract appropriate experts within the area of finance, marketing and technology.