How to get a Private Equity Financing. More information on this product will be available on the UB Solution's web site on November 15th, 2012

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Guide to the Private Equity Financing in the competitive Financial Markets. Courtesy of Universal Business Structured Solution.

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UB Solution is equipped with specialized knowledge of the marketplace. By examining every aspect of our client’s business UB Solution is able to engineer affordable financing quickly and efficiently.

An equity investment generally refers to the buying and holding of shares of stock by an investor and represent the residual claim or interest after all liabilities are paid. A private equity is the technique of financing commercial ventures with an investment of private money that is not subject to ownership of publically traded securities or requires SEC filings, but can be used for financing of private as well as public companies.
Typically private equity include seed investments, angel investing, venture capital, growth and mezzanine capital, and private equity funds. A Private Equity Investors seek to obtain a much higher risk adjusted return comparing to an investment in publically traded company. Each of these investors has its own goals, preferences and investment strategies, but all of them provide working capital that necessary for new product development, growth or restructuring.
The most common investment strategies in private equity are: Leveraged Buyouts, Growth Capital, Distressed/Special or Turnaround situations, Mezzanine and Venture capital.
In order to maximize the expected return in the distressed or even underperforming situation Private Equity Investor will bring the expertise in addition to the required capital to the table and work on the following: refocus company's strategy, reduce costs, initiate growth strategies, strengthen company's management, or even break up the company and sell it in parts.

The most common Private Equity Investment Structures are:

1. Common Stock.
The investor and company agree on the amount to be funded and the equity position, the investor will receive.
2. Preferred Stock.
Most Preferred structures have a fixed built in dividend and usually convertible into Common Stock at the option of the investor.
3. Convertible Debt and Debt Financing with an Equity Kicker.
Provides additional security for the investor, but usually used for income producing companies.
4. Reverse Mergers.
Private company merges into an existing public company with a stock symbol, which is usually is no longer operating a business (shell company).

Private Equity Investment will consist of the following steps:

  • Sourcing/preliminary underwriting of the transaction

Private Equity Investor determines that the deal fits its criteria: transaction size, industry, growth and earnings potential, sufficient management team, etc., but the most important factor is that Investor believes the company has the potential to increase in value and provide requires return on investment.                                                                                    

  • Due diligence/ Underwriting/ Ensuring the success for the expected time horizon

Perform due diligence and make sure that everything in the business plan proves to be in place.
Complete financial modeling, stress testing and operating plan.

  • Funding
  • Exit strategy

Have a potential exit strategy in place ( for example IPO in five years)

Before requesting private equity financing, please make sure you have the following in place:
1. Determine how much money you need and have exact break down for the future use of funds.
2. Have some money invested or ready to be invested into your project. Having equity in the project shows to an investor that you believe in the project and willing to risk your own capital.
Also be prepared to pay for any third party services: legal, appraisal, escrow, etc. if necessary.
3. Make sure that management team has sufficient experience in this particular industry and impressive resumes. For example: If you management team has experience in the entertainment industry do not expect to get financing for a renewable energy project.
4. Have professionally written business plan with cash flow projections, complete marketing plan, IRR, debt coverage, etc.
5. Be organized and cooperative with you potential investor.
Organize on line data room and put all required info there. If additional information requested make sure it is provided in a timely manner.
6. Disclose all the information necessary.
If during due diligence process lender or investor will discover information you have not disclosed in most cases financing for you project will be declined.
7. Have you company evaluated by a professional, so you would have an idea how much equity you will have to give up in exchange for a required amount of financing.

UB Solution is equipped with specialized knowledge of the marketplace. By examining every aspect of our client’s business UB Solution is able to engineer affordable financing quickly and efficiently.
Feel free to contact Universal Business Structured Solution for more information regarding our services or for an initial consultation and evaluation:
Yury Iofe, Managing Partner, MBA
Universal Business Structured Solution
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Yury Iofe
Universal Business Structured Solution
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Yury Iofe, Managing Partner, MBA
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