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Restructuring Private Equity Investments
Peter M. Susko
The Journal of Private Equity
Vol. 6, No. 4 (Fall 2003), pp. 58-67
Published by: Euromoney Institutional Investor PLC
Stable URL: http://www.jstor.org/stable/43503353
Page Count: 10
You can always find the topics here!Topics: Stock shares, Investors, Preferred stock, Common stock, Business structures, Financial investments, Shares outstanding, Stock prices, Financial management, Pro rata
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Numerous privately held, venture capital backed companies with worthwhile products and good management have needed to raise additional capital to continue their operations, complete product development, or simply survive until the market for their products and services improves. At the same time, valuations have declined dramatically, and companies with substantial valuations a few years ago may be viewed as having virtually no equity value today. The need to raise additional equity capital often requires a complete overhaul of the company's capital structure, with existing investors suffering extreme levels of dilution and new investors demanding a wide array of preferential terms. This article describes those terms and their implications, and applies them to a hypothetical restructuring situation.
The Journal of Private Equity © 2003 Euromoney Institutional Investor PLC