A investment deal going through 3 stages


                In our first operation management class we conducted an exercise called the paper puppet activity.

The first exercise reminded me when I was working in one of the investment banks in Bahrain. I was working as a private equity specialist. We created investment products and then we sold the shares of the investment product to investors all over the Arabian Gulf region with an expected rate of return at maturity. For any investment deal there is 3 stages. The first stage is the pre-acquisition stage. The second stage is the placement stage. The third stage is the post acquisition stage.

 I was responsible for the first stage. In order for an investment deal to be successful, all three stages must work smoothly and efficiently. Therefore, my role my was to create the right investment product by analyzing the company we will invest in and by analyzing the country the company is operating in and its competitors and in other words I would determine if there is an upside potential for growth in the company which will lead to an increase in its share price. After making the decision to invest in this company, I would sit with the team that is responsible for the second stage which is the placement stage. The placement team would try to understand everything about the investment product because they will travel to all the Arabian Gulf Countries in order to sell the investment product to the investors who will be encouraged to invest in the product after realizing the excellent rate of return. After collecting the necessary funds from the investors in order to invest in the product we will reach the third stage which is the post-acquisition stage. In this stage we would use the fund collected by the placement team from the investors to invest in the companies which is usually by purchasing a majority share in the company in order to establish a majority control on the company. Moreover, the post-acquisition team would carefully monitor the investments in those companies and would undertake the necessary changes that will add value to the company and will eventually increase its market share and will benefit our investors who we invested in their behalf.

                The problem occurred when we had a very strong pre-acquisition team and a very strong placement team but a weak post-acquisition team. Therefore, we created a good investment product that was able to meet the needs and requirements of the investors however we had problems in delivering our promises to the investors because our post-acquisition team was not able to perform or deliver good results by achieving or exceeding the target rate of return.  But to be honest with you, the duties and responsibilities of the post-acquisition team is the hardest because they have to get involved in the company we invested in by changing their systems and their management and to implement strategies that will add value and increase its market share. So their task was very challenging. Nevertheless, we have to find a solution in order to meet the target rate of return we promised our investors that we would achieve. My question is how can we solve this problem because our only problem is in stage three or in other words our real problem is specifically with the post-acquisition team?

One thought on “A investment deal going through 3 stages

  1. I cannot agree more that the post acquisition team have the most difficult part in the whole investment process. I would think that getting the post acquisition team involved when the investment is being considered or evaluated would be an advantage since the can put their input from the start. They would help in deciding on the assumptions in the model. Furthermore, the investment is based on assumptions that were done at a specific point of time, but, the post acquisition team will have to deal with adverse market conditions that occur during the life of the product.

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