Private equity is “smart money” that can bring the kind of sustainable and fundamental improvements companies need to pull themselves out of this financial crisis.
That’s the opinion of Rami Bazzi, Senior Executive Officer at Injazat Capital Limited, a leading asset management and investment bank in Dubai, UAE. Bazzi told Emirates Business that private equity brings management expertise in addition to an infusion of capital, a combination that is very much in demand right now.
“In the traditional financial system, banks normally give a loan depending on the credit ability of a company. They really don’t care about the company they have loaned money to as long as the debtor has enough cash flow to pay,” Bazzi says.
In contrast, a private equity investor is often (but not always) more interested in being a shareholder, as well as a lender. The success of PE-owned companies results from the culture of private equity. It’s all about improving shareholder value, achieving operational excellence and expanding the business. While there are some PE investors who rely on financial engineering to achieve profits, many others will invest in a company because they think they can fundamentally improve its operations.
His opinions were confirmed by a recent study by the World Economic Forum which showed that private equity owned firms are significantly better managed than government, family and privately-owned firms. Private equity-owned firms tend to have tougher metrics for performance, and they communicate these goals better throughout the organization.
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