Private equity is an important source of risk capital for smaller businesses.
1. Private equity is an important source of risk capital for smaller businesses.
Required:
(a) Explain the term private equity and discuss the main types of business that are likely to prove attractive to
private-equity firms.
(b) Identify the main issues that the board of directors of a business should take into account when deciding whether to
use private equity finance.
(c) Identify and discuss the factors that a private-equity firm will take into account when assessing an investment
proposal
(d) Use various examples to support your answers
(A) Explain the term private equity
Write down various definitions of PE with references. What conclusions can you draw from these definitions that can go
towards explaining the term PE
(B) Main type of business that attracts PE finance
Why small businesses generally prefer more PEF than larger firms ( give examples of known small businesses that use PEF)
(C ) Identify the main issues that the BOARD OF DIRECTORS of a business should take into account when deciding whether to
use private equity finance
List of both strategic and financial issues needed to be considered by a small firm board in PEF decision
Why these issues are important and why should they be considered by BODs before PEF decisions
(D) Identify and discuss the factors that a private-equity firm will take into account when assessing an investment
proposal
List both strategic and financial factors specific to a SME that need to be considered by a PE Firm for financing decision
(E) Use various examples to support your answers
Any relevant examples that reinforce your arguments on the assignment question