Private Equity

The English term “private equity“ stands for medium and long-term financing provided in return for a share in the basic value of enterprises which do not trade their shares on a stock exchange but which have the potential to create value in future. According to some definitions, the term is only related to investment into companies realized by the company’s own management (buy-in) or external company (buy-out). In some of the European countries all the stages of such a process are unified by the term „venture capital“ which in fact is the synonym of private equity. On the other hand, in the USA, the term „venture capital“ is used only for investment into beginning and expanding enterprises.

What is private equity?

Companies investing their private capital (private equity) offer the enterprises which do not trade their shares on stock exchanges their long-term capital (usually for the period of three to seven years) with the aim to support their growth and success on the market. If you are going to set up, enlarge or buy any existing enterprise or a daughter company or change or revitalize your business, the private equity can be the way to fulfil your intention. The procedure to gain private equity is very different from the loan or credit proceedings required from a bank which will require guarantee and will burden the enterprise with regular payment of interests and principal. Banks are entitled to obtain the interests and payment of the capital regardless the fact if the business is successful or not. The reward for investment into the private capital is a share in the company. Investors become shareholders and return from their investment depends on the growth and profitability of your business. Companies investing their private equity try to support the entrepreneurs in successful as well as difficult times. They are patient and flexible investors who are aware of the fact that to reach a goal can take a while and that also good enterprises can get into trouble for a certain period of time. In case of need, they may be willing to input more capital into the enterprise. While indebtedness of an enterprise is an obstacle to gain any more credit, the investment of the private equity improves the ratio of the debt to the capital and increases the credit ratio of the enterprise.

Nevertheless, the companies investing their private equity do not provide only the necessary finance. Quite often they also offer financial and strategic support to enable the enterprises with the growth potential to become important market players. It can generally be said that these companies wish to contribute to the development of the enterprises in which they invest. Even though the form of their participation in particular enterprises varies, they usually do not intend to take over the everyday operational tasks of the company. On the other hand, most investors expect that their representative will become a member of the managing board. This is the way how they can provide their everyday support while dealing with strategic and policy issues and implement their wider view to the further development of the enterprise thanks to their rich experience gained from other growing businesses.

Investment strategy

Primoco Investments searches investment opportunities on the field of information technology and media with the geographical focus on the Czech Republic, Slovakia and the Rusian Federation.

Common investment criteria:

investment in the range0,1 – 2 mil. EUR
required capital share34 – 51%
period of investment2 – 5 years

Investment process

StageNecessary inputTime interval
I. Preliminary judgement of an investment opportunity- Contract of confidentiality
- Elementary information on the company and the business plan
- Financial plan
2 weeks
II. Assessment- Business plan 3 weeks
III. Mutual agreement on common strategy- Term sheet / Letter of intent 2 weeks
IV. Due diligence- Data room 3 weeks
V. Obligatory offer of co-operation and financing- Draft contractual documents 2 weeks
VI. Signing of contractual documents- Contract2 weeks