Outline the Arguments for and against Private Equity Investment Essay

Outline the Arguments for and against Private rectitude Investment - Essay Example120). In most cases, hidden comeliness is driven by the probability to earn high returns from a ships company. Private equity money mainly come from the hush-hush merchandise but offstage equity firms enkindle invest the funds in both the public and hush-hush companies. It is important to note that when the investment is made in a public company, the company becomes private beca hire private investors take control of the company they have invested their money. The market for private equity has evolved significantly in the olden one or two decades. This is driven by the fact that a majority of investors have identify good opportunities that reward very high returns in the private equity market. Research studies reckon that the follow of expensive buyouts has been increasing every year with investors increasing the size of their investments in the private equity market. The yield of the priv ate equity market has led to a number of concerns regarding its sustainability in the long run. However, one turn over that has continued to dominate the financial market is whether private equity is a desirable investment or not. This paper sets to discuss the pros and cons associated with private equity in terms of improving company performance and benefiting the economy. Pros (1) upward(a) Company Performance The performance of a company is determined by a number of factors including professionalism and the use of technology. This therefore implies that a successful organization should have the best employees in terms of professionalism and in any case posses the most modern technologies. It is difficult for an organization to acquire the two in a situation where money is a constraint and this is where private equity comes to play an important role. Private equity ensures that investors acquire a company and place it among their portfolio. This is followed by the investors inj ecting funds into the operations of the company which brings along with it the concept of professionalism. Whenever an organization has been acquired by private investors, they tend to bring new practices and this includes new people and business experience. This is motivated by the fact that private investors are driven by the desire to record very high returns from their investment into an acquired company. They would therefore knock off a lot of capital in acquiring competent managers that will record high returns. When a company sales a portion of its shareholding to private investors, there results in the injection of funds which in conclusion improves cash reserves (Gopalakrishnan, Scillitoe, & Santoro, M., 2008, p. 1356). The company is therefore in a good position to use the invested funds to accelerate its development projects. A case in point is the takeover of Sicomed by Zentiva. Sicomed is located in Romania whereas Zentiva is located in Czech Republic. There are a num ber of advantages resulting from the private acquisition of Sicomed by Zentiva. The main advantage of the private equity is that there was restructuring of and the redevelopment of the technological infrastructure of Sicomed. There was also the restructuring and redesigning of the companys working environment starting from the management level down to the subordinate level. This can be viewed as a complete overhaul of the organizational structure of Sicomed. Sicomed used the private equity funds in acquiring new lines of production that replaced the old ones and this