Development capital

Development capital

Development capital investment background and financing

Development, or growth, capital investment refers generally to an investment in a mature company looking to expand or restructure operations, or to finance a major acquisition. Such companies are not able to generate sufficient cashflows.

Such companies usually generate revenue and are profitable but are often unable to take on additional debt either due to existing debt levels or market conditions. Private equity investment is seen as a realistic alternative.

An investment of this nature will not normally lead to a change in control of the business as investors take a minority stake in the company. In addition, unlike other forms of private equity investment, investors do not significantly intervene in management affairs. Existing shareholders are not looking to exit and existing management is settled.

Further guidance on development capital investment and financing can be found in the following Practice Notes:

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Development capital investment
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Private equity financing—equity
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Loan notes—fundamentals
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Equity warrants—private company
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Due diligence and disclosure in private equity transactions—fundamentals

Terms of development capital investment

The key component of any development capital investment

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