Private equity is the amount of capital investment injected by a financier into a start-up company that seems to have far-fetched structured goals deemed achievable and able to generate considerable returns in the future.
Private equity funds are generally divided into venture capital and leveraged buyouts.
Venture capital refers to the initial capital provided to start-up companies slated for meteoric growth, backed by solid back-end research.
Leveraged buyouts happen when a company acquires another company using borrowed funds to meet the acquisition cost. The assets of the acquired company are held as collateral for the debt raised.
Private Equity Outsourcing And Venture Capital Outsourcing Are Also Known As The Following:
- Private equity back-office outsourcing
- Private equity fund administration outsourcing
- Venture capital fund outsourcing
- Private equity research outsourcing
- Private equity business process outsourcing
- Venture capital business process outsourcing
- Private equity due diligence outsourcing
- Private equity portfolio monitoring outsourcing
Why Private Equity And Venture Capital Firms Need To Outsource
While thousands of outsourcing vendors operate globally, each one specialises in different parts of the private equity and vendor capital process. It is impossible to figure out the best, but some of the prominent ones are Wipro, Triniter, HCL, IBM and Capgemini.
With the increasing digitalisation in the space and especially amid the pandemic, private equity outsourcing has been gaining wider ground. It has become the need of the hour and created a world where efficiency is the keyword.
Although private equity outsourcing has emerged as a necessity in business today, it does carry risk since it involves the exchange of information.
Key Factors To Look For In A Private Equity Outsourcing Vendor
- Confidentiality: The vendor must keep client details confidential. A company also needs to ensure that due diligence data is not shared when work is divided among multiple vendors
- Time Zone Advantage: The extended private equity outsourcing team can work round the clock, doubling the speed of delivery. For example, a firm in the US may tie up with a vendor in India to allow work on a project to be continued even during the non-working hours of either of the teams
- Cost Savings: Depending on the location and experience of private equity outsourcing firms, they can save from thirty to seventy per cent of the cost involved
- Expertise: Outsourcing vendors can help private equity and venture capital firms get access to specialised and skilled expertise to enhance decision making
- Team Strength: As the private equity outsourcing team size can be modified in line with the workload, it is a cost-effective and flexible alternative to recruiting staff. That way, the workforce may be increased or decreased as required, leading to cost cuts
Functions That A Private Equity Outsourcing Vendor Can Assist With
A private equity outsourcing vendor helps to identify and sequence different tasks, chooses the best functional model and assists in implementation. Some of the areas in which they can assist clients are listed below:
- Investor Handling Operations – A private equity outsourcing vendor is a specialised unit that handles investor-related documentation and maintains the entire database. This is a crucial operation as data is a critical pillar in any organisation. The efficient management of data ensures that projects can be executed seamlessly by accessing resources from the database
- Fund Management – Private equity outsourcing vendors can perform private equity or venture capital fund administration functions efficiently, including raising funds, spreading awareness about the fund and presenting unbiased and error-free reports to investors about the fund. This reduces the risk of financial data mishaps. It can also give investors a sense of security about the fund’s health transparency
- Investment Management – This is the most crucial role that private equity outsourcing vendors play. It involves country reports and analysis, industry reports and analysis, target company profiles, target company due diligence, financial structures, valuations and other assignments related to investment analysis
- Portfolio Management – Private equity outsourcing vendors also work with strategy, research, data analytics, procurement and digital marketing, bringing these varied functions under one roof, thus ensuring cost cuts and high-quality services for clients
Private equity firms and venture capital firms are new kids on the block when compared with investment banking companies. However, they have understood the immense benefits of employing private equity outsourcing vendors in saving costs and ensuring steady growth.
In a market where increased demand commands ever more aggressive results, surgical cost reductions and sharp growth are required to get the returns that investors expect from their investments. Roping in a private equity outsourcing vendor is, therefore, no longer a luxury; it is a necessity, and investors demand it.