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Masuben

Private equity firm can be very helpful for a company’s growth as its money helps in various restructuring of the company as large amounts of funding are invested in the company . It could be very helpful in developing companies' growth from grass root level. As optimum money is invested the production of goods will be more and retailers will get the product on time. Also as money is invested in advancement of technology the cost of production can be low so the retailers could make some more profit and manufacturers can make the product much quicker. As private equity holders are more concerned about their money they are actively involved in business to maximise the value. As the funding is major the return on investment will be huge which can be very helpful for manufacturers and retailers.(Piloto Sincerre, B., Sampaio, J., Famá, R., & Flores, E. S. 2019)

As every coin has two sides, sometimes private equity has its own downside. The biggest threat is to manufacturers as it can lose its ownership. As with private equity, more money is involved in business which leads to loss of a larger share of the business as private equity firms always take the larger majority stake of the business. As a private equity holder becomes actively involved in business, sometimes they overpower the management decision like hiring, business strategy, business decisions and other valuable management responsibilities. The main mission of equity holders is to generate revenue on their investment which might lead to unethical activities as larger money is involved. Also as production is increased there might be more pressure on retailers to sell the item as supply of goods will be more and demand is low.(BACON, N., WRIGHT, M., MEULEMAN, M., & SCHOLES, L. 2012) As larger money is involved the business can grow rapidly across the countries so to conclude private equity can help in growing business more. 

2. Maheshwari

Private equity refers to capital that is not traded publicly. The acquisition of public manufacturing and retail firms, therefore, refers to privatization. Part of the entire firm is purchased by a high net worth individual or firm that aims at controlling it. This mostly involves buying the shares of the firm. This is mostly done by institutional investors such as pension funds and equity private firms (Chen, et al., 2020). This kind of acquisition has several effects on the firm. Some of these effects are outlined below.

a)      Huge amounts of funding

The process of private equity acquisition provides firms with a lot of capital that can transform their operations if properly budgeted for and utilized.

b)     Investor Involvement

         As a result of the huge amounts of money invested by the institutional investors into the firms, they are actively involved in the operations of the firm to ensure maximization of value as opposed to other options of funding which allow for limited involvement by the lenders.

c)      Higher Returns

The institutional investors bring along both funding and expertise into the firms. This helps improves the performance of the firms resulting in increased profitability (Zheng & Hu, 2019).

d)     Dilution of Ownership

               Acquisition by institutional investors in the form of private equity forces the owners of the firms to give up part of their ownership stake. On most occasions, they demand a majority of the control and therefore the owners are left with very little control if any (Chen, et al., 2020).

e)      Loss of control by management

                  Before the private equity acquisitions are made, management usually determines the direction of the firm by putting in place strategies to guide the operations. As a result of active involvement by institutional investors however, they may not be in a position to fully manage the firms without the influence of the investors (Zheng & Hu, 2019).