Private Equity As Alternative Financing In Malaysia
The Malaysian government, in crafting the the national financial blueprint, aims to build a new economic model leveraging on innovation and productivity. The Malaysian government, in crafting the financial blueprint, aim to build a new economic model leveraging on innovation and productivity. It actively encourages the development of private equity (PE) and Venture Capitals (VC) to expand and accelerate the capital market to enable these to become the next pillar of economic growth that will elevate Malaysia as a major international financial hub(1)
“PE is an alternative source of business funding, is becoming a growing asset class in Malaysia as more institutional investor and local companies warm up to the idea. More long-term funds like insurance and non-government have started viewing PE as a way to enhance their returns. The PE industries in Malaysia is still in its early growth stage, thus tye government expects this sector to become more prominent and vital as the country adapts to new realities of the market, ” Dr. Fauzi shared.
Importance of Private Equity Financing
Touching on the different sources of equity financing solutions available in the market today, Dr. Fauzi explained that at present a number of options are available for business funding such business angles, venture capitalist, PE, crowd funding, enterprise invesment scheme (EIS), and of course, the stock market.
- While VC is for companies entering into new business and technologies that could potentially allow country to collectively out perform its neoghbours, PE focuses on companies thst have already established themselves buy seek the next level of oush for growth.
- At present, most of these imitiatives are focusef on growth sectors such as information and communication, multimedia, biotechnology and renewable energy.
- Equity financing is a way to raised capital from external investors in return for handong over a portion of shares in one’s business. This may take many forms, invluding a share in future profits, but id most frequently associated with sharing the ownership of the business to some degree.
“PE fund mostly buy mature companies that are well established. These companies may be weakening or not making profits they should be due to inefficency. PE tend to buy into targeted or investee company and streamline their operations to increase revenue. Venture capital firms, on the other hand, mostly invest in start-ups with high growth potential. ”
PE financing has some distinct benefits over other forms of funding. Here are some of its advntage :
PE Financing : Distinct Benefits
1. Large Funding Sum
PE can provide by far the largest ammount of amounts of money for businesses. The deal are measured in hundreds of million millions of dollars. Be it from angel investment funds, seed funds, ventire capitals or development funds, as long as the investee companies or their projections perform to its expected potential, it will eventually boost up huge funding opportunity from PE
2. Active Involvement
With many other funding option that VVM had reviewed, the investor or lender has only minimal involvement in the running of the business. PE firms, on the other hand, are much more hands-on and will help re-evaluate all characteristics of the business to see how VVM can maximise its value
3. High Returns
Development funds can provide investee companies with room for expansion and improvements. the industy’s focus on improving fundamental business performance means PE investment could be one of the most potent drivers for businedd wide improvementd in corporate productivity. Eventually, economics of scale directly improve high returnd for investors at the same time
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