Debt is that which is owed; usually referencing assets owed. Some companies and corporations use debt as a part of their overall corporate finance strategy.
At the start of a business, owners put some funding into the business to finance assets. In accounting terms, ownership equity is the remaining interest in all assets after all liabilities are paid. Equity capital is defined as the amount of capital provided by the company's owner(s).
Providing new equity (an "issuance" of new equity) gives the firm new capital and increases owners' equity by the same amount and time needed.
The private placement market for debt securities essentially consists of medium and the long term debt securities such as debentures and bonds being placed privately with select investors.
In India, private placement of securities is preferred to public issue since the placement costs are lower and the investors are mostly financial institutions.
There are three main constituents in this market-issuers, the investors and both these are brought together the investment banker who acts as the arranger to the placement. The deal process starts with the issuer rolling out with the plan to raise fund through the private placement route.
The first step in this direction would be to appoint an investment bank as an arranger to the whole placement. The arranger or the placement agent, as the investment banker may called, is short-listed and the finalized usually through talks and invitation of quotation. The issuer then furnishes a brief profile of itself and the proposed fund raising programmed.
Based on such information, the investment bank put in bids for raising the founds quoting the fees for the same. The arranger will finalized based on the bid and other qualitative parameters. The investment banker is to ascertain that the company has taken the necessary approvals from its board.
The investment banker also help in obtaining the rating for the issues, to make the allotments and receives the funds from the investors, documentation of private placement, collect the receipt of commitment letters from the investors and the acceptance thereof by the issuers.
After receiving commitment letter, the issue is treated as closed and issuer puts up the letter of intent for consideration by its board of directors and the investment bankers has to scrutinize the letter of intent before it is put up to company’s board.
The placement part of the deal itself is a limited purpose exercise that has no road shows or publicity campaign as in the public issues. It is largely accomplished through the network of the investment bankers and the strength of the relationship with the investor community.
Most of the companies, both listed and unlisted categories, make the issue of equity shares to different shareholders without making a public offer. Such issue can be called as the term private issue of equity. In the area of private equity financing, the role is more transaction oriented.
The value addition of the investment banker in such a deal is in the valuation and transactions advisory. However, there are certain caveats that the investment banker has to fully aware of while raising the private equity for the listed companies. These primarily relate to the disclosures of information to the potential investors. However, in private equity deal, the disclosure is for the purpose of enabling the potential investors to take an informed investment decision.
In this context, the whole process has to be handled with extreme confidentiality and through suitable documentation. The investment banker has to structure the offer literature including the information memorandum keeping this issue in mind.
The offer literature has to captures the true value proposition of the company and provides an investor friendly offer structure. It also provides the other services deemed to ensure a successful outcome to this engagement. This way they are as good as publicly issued instruments but can be placed easily saving a lot of time and floatation costs.
The engagement of investment banker in connection with a private equity transactions can be summarized as follows:
Identify and initiate contact with the prospective investors, represent or accompany the company in meetings, presentations and ensuring negotiation with prospective investors, Assists the company in coordinating due diligence program, Review and advise on proposals/offers from investors and provide necessary services deemed to ensure a successful outcomes to this engagement.
Therefore, as far as issuers are concerned, private placement is more convenient and an efficient way of raising finance and the investment bank play a major role in this regards
At the start of a business, owners put some funding into the business to finance assets. In accounting terms, ownership equity is the remaining interest in all assets after all liabilities are paid. Equity capital is defined as the amount of capital provided by the company's owner(s).
Providing new equity (an "issuance" of new equity) gives the firm new capital and increases owners' equity by the same amount and time needed.
The private placement market for debt securities essentially consists of medium and the long term debt securities such as debentures and bonds being placed privately with select investors.
In India, private placement of securities is preferred to public issue since the placement costs are lower and the investors are mostly financial institutions.
There are three main constituents in this market-issuers, the investors and both these are brought together the investment banker who acts as the arranger to the placement. The deal process starts with the issuer rolling out with the plan to raise fund through the private placement route.
The first step in this direction would be to appoint an investment bank as an arranger to the whole placement. The arranger or the placement agent, as the investment banker may called, is short-listed and the finalized usually through talks and invitation of quotation. The issuer then furnishes a brief profile of itself and the proposed fund raising programmed.
Based on such information, the investment bank put in bids for raising the founds quoting the fees for the same. The arranger will finalized based on the bid and other qualitative parameters. The investment banker is to ascertain that the company has taken the necessary approvals from its board.
The investment banker also help in obtaining the rating for the issues, to make the allotments and receives the funds from the investors, documentation of private placement, collect the receipt of commitment letters from the investors and the acceptance thereof by the issuers.
After receiving commitment letter, the issue is treated as closed and issuer puts up the letter of intent for consideration by its board of directors and the investment bankers has to scrutinize the letter of intent before it is put up to company’s board.
The placement part of the deal itself is a limited purpose exercise that has no road shows or publicity campaign as in the public issues. It is largely accomplished through the network of the investment bankers and the strength of the relationship with the investor community.
Most of the companies, both listed and unlisted categories, make the issue of equity shares to different shareholders without making a public offer. Such issue can be called as the term private issue of equity. In the area of private equity financing, the role is more transaction oriented.
The value addition of the investment banker in such a deal is in the valuation and transactions advisory. However, there are certain caveats that the investment banker has to fully aware of while raising the private equity for the listed companies. These primarily relate to the disclosures of information to the potential investors. However, in private equity deal, the disclosure is for the purpose of enabling the potential investors to take an informed investment decision.
In this context, the whole process has to be handled with extreme confidentiality and through suitable documentation. The investment banker has to structure the offer literature including the information memorandum keeping this issue in mind.
The offer literature has to captures the true value proposition of the company and provides an investor friendly offer structure. It also provides the other services deemed to ensure a successful outcome to this engagement. This way they are as good as publicly issued instruments but can be placed easily saving a lot of time and floatation costs.
The engagement of investment banker in connection with a private equity transactions can be summarized as follows:
Identify and initiate contact with the prospective investors, represent or accompany the company in meetings, presentations and ensuring negotiation with prospective investors, Assists the company in coordinating due diligence program, Review and advise on proposals/offers from investors and provide necessary services deemed to ensure a successful outcomes to this engagement.
Therefore, as far as issuers are concerned, private placement is more convenient and an efficient way of raising finance and the investment bank play a major role in this regards