Seeking to invest in the private equity sector can be very profitable and offer very significant returns, but you must remember that it is also a very high risk investment strategy.
You must ensure that companies meet a strict set of criteria before investing. Here is a list of criteria recommended by acquisition experts from companies like DASPV Fund, Robert Wildmore, and John Whiteman.
14 point criteria
1. Investee company likely to be acquired by DASPV as an Undervalued Asset
2. An invested company will be strongly led by a committed entrepreneur who is motivated to succeed within the business.
3. The company must have a strong and capable management team
4. The business must have robust, documented and effective management systems
5. Businesses must operate within market sectors that are growing or are expected to have significant future growth and development potential.
6. Companies are expected to be leaders in their chosen fields and to have defining characteristics that differentiate them from their competitors, giving them a competitive advantage.
7. The companies themselves must have a compelling and achievable business proposition, which must appeal to their chosen markets. They must have the ability to adapt.
8. Business management must operate within the framework of sensitive financial controls combined with external evaluations.
9. Significant increase supported by a solid business plan
10. The business must be able to change or expand
11. A history of earnings and/or positive cash flow
12. Need for capital injection to unleash full growth potential
13. A scalable business model
14. A business with a good track record with existing clients and no pending adverse litigation
INVESTMENT OBJECTIVES
1) Minimize investment risk by investing in a diverse portfolio of companies where appropriate
2) Invest in undervalued assets whose value can be increased through the provision of capital, management advice and strategic direction from the board
3) Create significant shareholder value for DASPV members by identifying companies with global potential and high growth potential
4) Focus on acquiring distressed assets often through a post-insolvency process and timely exit strategies.