Himanshu Seth , Amit Shekhar , Isha Agrawal
June 19, 2023
Private equity (“PE”) and venture capital (“VC”) transactions have gained significant momentum in India's dynamic business landscape over the years. With the rise of startups and a burgeoning entrepreneurial ecosystem, PE and VC investors are increasingly looking to invest in promising Indian companies with the aim of realizing high value gains over a relatively shorter period of time. However, navigating the legal and regulatory framework surrounding these transactions requires a thorough insight of the key steps encompassed in the beneficial conclusion of the said deal.
This article aims to provide an overview of the essential steps in a PE and VC transaction in India, shedding light on the process and highlighting important considerations and discuss and elaborate upon the entire lifecycle of a transaction, beginning with the initiation of a deal, a chain of deliberations amongst the parties and up to its completion and closing.
STEPS INVOLVED IN A PE/VC TRANSACTION
Investors utilize diverse approaches, including networking, participation in industry conferences, and leveraging professional connections, to discover potential investment prospects. For this purpose, investors actively search for startups that possess innovative concepts and significant growth potential. Thorough screening of investment opportunities is essential to assess the viability of the target company based on factors such as market potential, competitive landscape, scalability, and regulatory/legal compliances. Needless to say, that the strategies of the merger and acquisitions (“M&A”) and PE/VC transaction process differ from company to company, however, the following are the key steps in the lifecycle of a transaction:
In recent years, there has been an upsurge in the PE and VC transactions in India which offer significant opportunities for investors however, navigating the legal and regulatory landscape is essential for the success of a transaction. By understanding the key steps involved in these transactions, including deal origination, valuation, negotiation and term sheets, legal due diligence, preparation of the definitive transaction agreements and closing, post-investment monitoring, and exit strategy implementation, the stakeholders can efficiently navigate through the transaction processes.
The upcoming articles in the ‘Series’ will further explore each stage of the PE/VC transaction extensively with respect to the legal, commercial, and regulatory implications.
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