7+ Private Equity Investment Proposal Templates
In every business venture, the opportunity cost is always something to consider. Opting your company to private equity, instead of going public, comes with a number of trade-offs, with the most notable change being that you will no longer be able to easily buy and sell your shares in a publicly traded market. You may also see proposal samples.
But what comes after compromises are also attractive benefits. For one, private companies are no longer required to go through rigorous monitoring by brokers when it comes to publishing their financial performance. This gives private companies more flexibility in managing their business operations and in inviting investors to their company.
Elements of a Good Private Equity Investment Proposal
When securing funding for your business set at private equity, most likely, you will only have one shot to get an investor on board with your investment proposal, so it is only important that you complete it with the basic parts. But what surmounts the need for the structure are the characteristics of your proposal to be convincing, engaging, and compelling. To make your proposal stand out, take heed of the following elements:
1. Investment Viability: The safety of investments signifies protection against devastating loss and resilience in changing conditions, especially in cases of companies under private equity. Know your numbers and give proof to your potential investors that your company can excel financially. A potential high return and a clear exit strategy is what comprises a great investment viability.
2. Definite Business Timeline: Investors would want to know when they will be getting back their return on investment and profits. They also don’t want entrepreneurs to incur losses on their dime. When pitching this through your investment proposal, business timelines lay out a clear debt repayment timeline and have a solid business model to prove that your company can become profitable at a certain period of time.
3. Attractive Rate of Return: Investors want to pool in their fund mainly for one thing, and that is to make money. Investors are always on the lookout for companies that have quick growth and can attain high growth scale. The significant profit projected in your investment proposal will give them the idea of how attractive their rate of return will be should they invest.
7+ Private Equity Investment Proposal Templates
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Steps to Make a Great Private Equity Investment Proposal
A private equity proposal is no simple business proposal. It is an extensive formal document with complex parts. The following are the essential parts of a private equity proposal and a short descriptive process in coming up with each.
1. Summary: The first part of your private equity investment proposal is also known as the elevator pitch or the executive summary. It is a concise exposition, usually at most half of the page long, of your proposal that paints broad strokes on what you want and what you will do if you get it. In any case, a summary should be able to keep your investors hooked and interesting to make them read the rest of your proposal.
2. Investment Highlight: Your pitch for the investors to invest in your private equity venture continues in this part. Enumerate five, and at best seven, key points of your business that will attract them to fund for you.
3. Project Overview: This is the first of the few parts where you will talk about your business. Project overview gives the investors a bird’s eye view of your project or asset you are putting up for a private equity investment. It should be able to give expansive information on your project, the details of your property, the accurate measurements and statistics of your business trends and market share.
4. Investment Overview: Much like the project overview but this time it focuses on the particulars of financing your business. It will have your requested amount and the type of investment you are proposing for them to follow. Also, include the estimated value for assets you expect to obtain at the end of the investment period.
5. Exit Strategy: Like how every building is required with an emergency fire exit, your investment exit strategy offers ways on how a certain investor can pull out their funding. Enumerate instances where they can leave the investment pool and site conditions and terms.
6. Business Timeline: This part serves as a look-back and a forecast of your project. It must provide a concise historical overview of your project up until the present as well as your business plan moving forward. In setting your project timeline, use an estimate of weeks, months, and years rather than actual dates. Overall, this part should be a balance of narrative and graphic aids.
7. Market Overview: Demonstrate the status quo of your business against its competitors and describe the demographics of your potential customers with charts and graphs. This will make this research-based part easier to understand.
8. Profiles: This part entails the work description and experience of the people in your team. You should be able to list at least three executives that are important in the project.
Tips for a Great Private Equity Investment Proposal
- Add visuals: Make use of maps, layouts, and photos so you can illustrate your business plan and processes better. Your visual elements can be scattered throughout the proposal or collected in one separate section.
- Have an expansive market data: Your market data contains information that are not included in the market overview but are still important enough that it reinforces your private equity investment pitch. They do not need to be really exhaustive, just a few pie graphs and charts that compares your own business to competitors as well as your projections of sales based on the market trends.
Types of Private Equity Investment Proposals
Private equity investment proposals are classified according to the type of private equity funding that a company wants to receive. There are various types of these funding, but, commonly, there are four, and they are the following:
1. Leveraged Buyout Fund: This type of private equity investment combines the investor funds with borrowed money to improve the profitability of the company. A company funded through this type of investment can acquire larger companies that it can normally afford, netting larger rate of returns once the investment pays off.
2. Venture Capital Fund: Venture capital is investment firms that usually fund startup companies and other businesses that are still at their early stage of business. Venture capitals only take a minor share at the company in exchange for their funds, making the young business grow through the control of its own company management. It can be risky since these companies often have little to no track record of business, which is why venture capitals only invest to those with high growth prospects.
3. Growth Capital Fund: This type of funding is similar to that of the venture capitals, but with the target shifting to more mature companies. The private equity fund provided through growth capital enables a company to fuel its expansion. It’s less risky than venture capital funds since companies under this type already have a considerable history in conducting business.
4. Distressed Private Equity Funds: Distressed funding happens when a company tries to get firms and investors to pool funding as it faces serious financial difficulty. This type of private equity fund enables interested entities to buy shares of the company at a very low price, as long as they will provide financial assistance in restructuring the company so it can yield a return on their investments.
Private Equity Investment Proposal Template Sizes
Private equity investment proposal templates are available at standard sizes of US (8.5 inches by 11 inches or 8.5 inches by 14 inches) and A4 (8.27 inches by 11.69 inches).
Private Equity Investment Proposal FAQs
What’s the usual span of time for an investor’s exit strategy?
Some investors may have planned on staying in the investment for a long time, but they want to know the earliest practical moment they can exit if they wish to leave. Take note, though, that this part does not mean that your investors will exit, but you are offering them an option to potentially exit at some points. Most potential exit strategies span between 3 to 5 years.
What does pro forma mean in investing?
Pro forma is a method of presenting financial results in a proposal through a forecast that emphasized estimated net revenues, cash flows, and taxes. It is helpful on the investor’s side as it will help them determine the company’s intrinsic valuation that denotes confidence in its viability in the market. Pro forma is a Latin term meaning “for the sake of form” or “as a matter of form.”
The value of your company starts to be clear once it begins generating profit. While your proposal must be complete and compelling, it is always better if it is shorter, around 50 to 100 pages. Above all, an effective private equity investment proposal is not extravagant nor excessive, but it is clean and concise in both form and style.