The cost of investment for a PE will be economically the same as seen for a VC, barring for the capital cost in specific cases. However, given that the PEs are strategic equity holders, they would always prefer to hold the investment using a holding-subsidiary company structure. This would help them to exercise the control from outside without involving in the day-to-day operations of the subsidiary as well as in maintaining arm’s length as there can be more than one strategic investor too. As per the Companies Act 2013, the holding company will enjoy a majority status if it has more than 50% of the total share capital of the subsidiary or exercises ‘control’ over the composition of the board of directors.
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