I. Private equity investment process 1. The first stage: eight steps First, the enterprise signs a service agreement with the investment bank (or financing consultant). The agreement includes the overall services provided by investment banks for enterprises to obtain private equity financing. Investment banks immediately began to set up full-time teams with financing enterprises to prepare professional private equity financing materials. Private equity financing materials include: private equity financing memorandum-about company introduction, structure, products, business, market analysis, competitor analysis, etc. (This memo appears as a slide, with a total of 20-30 pages); Historical financial data-audited financial reports of the enterprise in the past three years; Financial forecast-the growth of sales revenue and net profit of the enterprise in the next three years after the financing funds are in place (PE usually relies on this forecast for enterprise valuation, so this work is very critical). Investment banks and enterprises jointly set a target valuation for enterprises, that is, how many shares the boss is willing to sell and how much money he will get. The author usually suggests that enterprises sell no more than 25% of the shares and minimize the dilution of the shares to ensure the boss's operational control over the enterprise. Prepare private financing materials. Investment banks began to communicate with PE partners by teleconference and introduce the company to them. At the same time, the investment bank will send financing materials to a number of PEs to discuss the financing of the project with them. The goal of this stage is to make the best PE partners interested in the company. Under normal circumstances, investment banks will answer the first round of PE questions instead of enterprises and communicate intensively with these PEs. The goal is to decide which PE has the greatest interest in the company, which is likely to give the highest valuation, and has investment experience in related industries, which can help the company successfully go public. Screen out several most suitable investors. These investors are very familiar with the industry in which the company is located, are very optimistic about the company and will give the best price. 2. Phase II: Six steps to arrange face-to-face talks between PE partners and company bosses. Investment banks usually send core personnel to attend all meetings, introduce the background of PE to the boss, help the boss optimize the way to answer questions, and summarize all meetings with PE. Field trip -PE will visit factories, shops or other company offices. At this stage, the boss doesn't have to attend, but he can send relevant personnel to accompany him. However, investment banks will accompany PE all the time to ensure that all their questions can be answered. Letter of Intent for Investment-The goal is to obtain letter of intent for $ term investment from at least two or three private equity firms. The letter of intent for investment is a preliminary investment intention contract issued by PE to enterprises. This contract will specify the company's valuation and some terms (including how many shares to sell, the type of shares, and the timetable for completing the final transaction, etc.). ). The best situation is to obtain multiple investment letters of intent to form a bidding equivalent to auction, in order to obtain the best price for the enterprise. Investment banks will negotiate with the owners of private equity funds to help them get the best prices and terms. The boss decides which private equity investment fund to accept and signs an investment letter of intent. The private equity investment process is described above. Investing in private equity must strictly follow the above process. Only in this way can the risks of all parties be minimized, and at the same time, these acts have legal effect. Once one party agrees illegally, it can safeguard its legitimate rights and interests through legal means to avoid problems such as difficulties in safeguarding rights due to process reasons.