SHAREHOLDER DILEMMA: WHAT STAKE TO OFFER TO FINANCIAL INVESTORS? PROPOSALS BASED ON FINANCIAL PRINCIPLES

Companies in their growth stage often require sums of money that exceed their operating cash flows. A need for raising funds might be associated with entering new markets, expanding production, acquiring other businesses. Debt and equity are the two main sources of capital available to businesses and each have advantages and limitations. A sale of ownership stakes to private equity funds and other financial investors is an attractive alternative as far as it does not increase leverage and leads to competitive advantages achieved thanks to expertise and access to capital markets provided by the investor. Private equity financing requires business owners to find their way solving a number of questions, including a choice between a strategic, financial and operational investor as well as making a decision on a stake offered to him.