Private Equity Mitigating Investment Risk
Private Equity and Venture Capital investments helps investee companies grow, however investing is inherently risky. Unlike Public Market investment where financial information is readily available, buy-side firms invest into non-quoted companies. Companies House is a source of financial insight into a company but not a complete picture.
Having worked in Investment Banking over two decades, our team advised on Merger & Acquisitions and represented buy-side clients. We understand Private Equity and Venture Capital investment and associated financial performance of portfolio companies are exposed to risk beyond investors control. Comparable analysis (Comps) and discounted cash flow (DCF) forecasting help provide insight into potential future financial performance, but what is the financial risk to a business and investment if a Key Person or Shareholder became medically incapacitated or died?
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The Value of People and Investments
James Autry said: “There is no business, there are only people. Businesses exist only among people and for people”. Like James Autry, Fatgreen believe people are the most important assets for businesses. People build businesses, generate ideas, provide direction, create corporate culture and take dreams from inception to reality.
Given the value people impart on business growth, can there be a justification for not protecting your business and associated investment from the financial risk associated with loosing a Key Person or Shareholder following medical incapacitation or loss.
No Obligation ConsultationThe Cost of People and Investments
Just as professional investors use Comps and DCF methodology to calculate companies projected valuations, Fatgreen use similar financial methodologies to calculate the financial impact to investments and companies following the loss of a Key Person or Shareholder.
Our methodology includes analysis of company earnings and cash-flow forecasts to calculate the financial value that Key People contribute. Using similar financial methodology, Fatgreen can also calculate the value of Shareholders stock and the cost shareholders would incur if required to buy-back shares from a deceased shareholder.
Factored into our analysis are variable factors including time and cost of replacing a Key Person. Twenty years in Executive Search securing talent for Investment Banks, Private Equity firms and their portfolio companies taught us that replacing people can be fraught with challenges and incur significant cost.
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What is the Optimum Level of Investment Protection
Once we have calculated the financial cost associated with losing a Key Person or Shareholder to your business and investment Fatgreen can start to help you mitigate the financial risk.
We mitigate your financial risk by arranging Key Man or Shareholder Protection solution. Adoption of our rigorous financial discipline enables Fatgreen to arrange an “optimal” level of cover at a cost-effective priced point.
Once covered, you receive peace of mind that your portfolio company and investment are protected from the financial loss associated with medical incapacitation or death of a Key Person or Shareholder.
No Obligation Consultation
2021 in Review
2021 was a bumper year for Mergers and Acquisitions (M&A), Private Equity and IPO’s.
Across the mid-market, Private Equity activity increased by 40% on 2020 which in turn fuelled demand for M&A. During the same period, the UK IPO market witnessed the largest number of IPO’s since 2007.
Whilst deal volumes increased across every sector, investment into TMT and Business Service sectors accounted for over 50% of transactions.
Drivers of growth included anticipated changes in Capital Gains Tax (CGT), a return of confidence as the UK emerged from Covid and enhanced liquidity in the economy.
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