1. What is the definition of private equity investment?

A: Private equity investment refers to an investment method of investing in unlisted shares or non-publicly traded shares of listed companies.

From the perspective of investment methods, private equity investment refers to the equity investment in private enterprises, that is, unlisted enterprises. In the process of transaction implementation, the future exit mechanism is considered, that is, through listing, mergers and acquisitions or management buyback, the shares are sold for profit.

Broadly speaking, private equity fund refers to the equity investment covering all stages before the initial public offering, that is, the investment made by enterprises in seed stage, initial stage, development stage, expansion stage, maturity stage and before the initial public offering. According to the investment stage, relevant capital can be divided into venture capital, development capital, M&A fund, mezzanine capital, revitalization capital, pre-IPO capital and others, such as private equity investment after listing, bad debts and real estate investment.

2. What are the subjects of international private placement?

A: The three core subjects of international private equity are investors, private equity funds and enterprises that accept private equity investment. Specifically, it refers to investors participating in international private placement, international private placement funds, enterprises accepting investment and intermediaries providing professional services in private placement, such as accounting firms, law firms, investment banks, information consulting companies and investment consulting companies.

3. What is the relationship between these three core subjects?

A: Investors give money to private equity funds. Private equity funds, after project screening, invest money in companies that accept investment and manage the company together with the company manager. After the company matures, it will transfer shares, quit the company and gain asset appreciation through initial public listing and overall sale, and then the private equity fund will return the capital and its appreciation to investors. In this way, the round of private equity funds has come to an end.

4. What's the difference between private equity funds and Public Offering of Fund?

A: (The former is private placement, and the latter is public offering)

(1) Distribution method-non-public offering &; Open mode

(2) The target of offering-a few specific investors, mostly individuals or institutional investors with certain risk tolerance and large assets &; Uncertain social public investors

(3) Information disclosure requirements-rarely disclose relevant information publicly. Generally, it only takes half a year or a year to announce the investment portfolio and income privately, and the investment is more hidden &; Require regular disclosure of detailed investment objectives, investment portfolio, etc.

(4) Service mode-"tailor-made" mode, in which investment decisions mainly reflect investors' intentions and requirements; "Wholesale" style, investment decisions are mainly based on the style and strategy of fund management companies.

⑤ Supervision principles and standards-relatively loose supervision, high degree of freedom in fund operation, less restrictions or constraints from regulatory authorities, and more flexible investment &; There are strict requirements for fund managers; There are strict restrictions on fund investment activities.

⑥ Requirements for investors-having a certain scale of investment funds and a rational investment concept &; Relatively low

⑦ Risk-Relatively large and relatively small

⑧ Relationship between the two parties-investors can negotiate with the fund sponsors to jointly determine the investment direction and objectives of the fund, which has the nature of agreement &; Fund sponsors unilaterally decide related matters, and investors passively accept them.

5. What are the advantages of private equity funds compared with Public Offering of Fund?

A: (1) More targeted: Since private equity funds are targeted at a few specific investors, their investment objectives may be more targeted, and they can provide tailor-made investment service products according to the special needs of customers;

(2) More flexibility: Generally speaking, private equity funds require fewer procedures and documents and are subject to fewer restrictions. General regulations are not as strict and detailed as public offering funds. For example, relax the investment restrictions on a single stock, an investor can hold more than a certain proportion of funds, and the minimum limit on the size of private equity funds is even lower. Therefore, the investment of private equity funds is more flexible;

(3) More concealment: In terms of information disclosure, private equity funds don't need to disclose detailed investment portfolios on a regular basis like Public Offering of Fund, and generally only need to announce their investment portfolios and earnings privately for half a year or a year. The government's supervision over them is far looser than that of Public Offering of Fund, so the investment is more hidden and the chances of getting high returns are greater.

6. What are the defects of private equity fund itself?

A: Private equity funds also have obvious defects: private equity funds are relatively loosely regulated by the government and lack transparency in their operation. There may be insider trading, market manipulation and other irregularities, which will not be conducive to protecting the interests of fund holders. At the same time, they may get higher returns and contain greater investment risks, such as moral hazard and agency risk of fund managers. In addition, the number of fund securities issued in this way is generally small, and investors' recognition and liquidity are poor, so they cannot be listed and traded.

7. The difference between private equity investment and venture capital:

A: The differences are as follows:

1) The investment stage is different. The main difference between venture capital and private equity investment lies in the different investment stages. Generally speaking, when the venture capital fund invests, the invested enterprise is still in its infancy and immature, and may even have a new technology, invention or new idea without developing specific products or services. Private equity investment funds invest in mature enterprises that have formed a certain scale and generated stable cash flow. Even some private equity funds are only keen to invest in Pre-IPO (a relatively short period of time before the company goes public), which is completely different from venture capital in this respect.

2) The main industries of investment are different. Venture capital funds usually invest in high-risk and high-return high-tech enterprises. Since 1990s, the main investment objects of venture capital have shifted from genetic engineering and computer hardware to CD-ROM, multimedia, telecommunications, computer software industry and Internet, all of which are high-tech industries. Private equity investment has no such restrictions and preferences. For example, in China, private equity investment tends to traditional industries such as food, clothing and real estate.

8. What are the investment procedures of international private equity funds?

A: Generally speaking, it requires the following steps:

(1) Preliminary review: After receiving the company's application form or financing plan, private equity funds usually only need to browse it in a very short time to decide whether the project is worth investing.

(2) Screening interview: If the business plan of the enterprise passes the preliminary examination, the private equity fund will further screen the enterprise. Generally speaking, the following questions need to be considered in this process.

1) scale and investment policy;

2) market;

3) geographical location;

4) The stage to be invested.

(3) Due diligence:

If the initial interview can satisfy the private equity fund, then the private equity fund will start to inspect the operation of the enterprise. The International Private Equity Foundation will hire lawyers, accountants and other professionals to conduct due diligence on enterprises, and carefully evaluate the technology, market potential and scale and management team of interested enterprises through investigation.

(4) List of clauses:

If the private equity fund is optimistic about the prospect of the applied project, it can start cooperation negotiations on the investment form and valuation.

(5) Negotiate and design transaction procedures:

After the due diligence is completed, if the operation of the enterprise is recognized, the private equity fund will negotiate with the enterprise and agree on the relevant financing conditions. It will design a mutually agreed investment contract with the enterprise. From the perspective of private equity funds, designing investment contracts has three purposes:

1) Set the transaction price in the contract;

2) The contract sets a protective contract for private equity investment, which can limit the capital consumption and the salary of managers. It also stipulates the circumstances under which private equity funds can take over the board of directors, forcibly change the management of enterprises, and realize investment by issuing shares, mergers and acquisitions, buying shares, etc. The protective clauses can also restrict enterprises from raising funds from other channels to avoid dilution of shares;

3) Through a mechanism design called earning, the contract can link the shares obtained by entrepreneurs with the realization of enterprise goals and encourage entrepreneurs to work hard;

(6) Contract signing and delivery:

After the negotiation, the international private equity fund will sign a formal contract with interested enterprises to clarify the relevant contents of the investment, including the term, method and exit method of financing. In the contract, international private equity funds will strive to make their investment returns adapt to the risks they bear. Finally, private equity funds and funded enterprises make final delivery and complete private equity financing.

(7) Supervision after the investment takes effect:

After the investment takes effect, the private equity fund will have the right to supervise the shares of the invested enterprises or other forms of cooperation. Private equity funds play the role of consultants in the board of directors or cooperation. Since private equity funds may be involved in several enterprises at the same time, they have no time to participate in the daily operation and management of enterprises. Private equity funds, as consultants, mainly put forward suggestions on improving business conditions to obtain more profits, help find new managers, open up new sales channels and business directions, regularly contact entrepreneurs to track business progress, and regularly review financial analysis reports submitted by accounting firms.