Question

Describe the benefits of the private-equity ownership model versus public ownership and family-ownership.

Answer 1

Advantages of private equity companies
1. The time taken for the issue of shares and raising capital is significantly less.
2. Statutory compliance is less.
3. It provides significant control to a small group of investors.
4. Less number of directors required.
5. Restriction on transferability of shares ensures to a certain extent that ownership remains in the hands of those desired.

Advantages of public equity companies:
1. Most transparent in model.
2. Can raise a large sum of money through public, that is better access to capital.
3. Easy to transfer shares/ownership & liquidity in the market.
4. The value of the share is known.

Advantages of the family business model.
1. Fast and effective decision making.
2. More loyalty towards the business.
3. There is a long term goal and orientation, as continuity of business is of great importance to the older generation.
4. It is structured to teach and train the young members of the family