Valuation of Coporations from Private Equity and Governance Research Paper

Valuation of Coporations from Private Equity and Governance - Research Paper Example It also throws light on the influence of corporate governance that such a system brings along with it into an industry. Private equity is the process of raising equity capital by gathering investments from individuals and institution that are known to have high net worth and have supreme financial strength. The investing firms are called the Private equity firms. Most of the top companies follow the private equity concept. On the other hand it is seen that good corporate governance raises the overall value of the firm. The general assumption to this concept is that, firms with good internal practice will be able to meet their goals and objectives effectively, thereby raising a company’s value. The research aims to analyze the operating performance of acquired companies and the internal rate of returns that the funds generate through private equity. In addition a brief study about human factors impacting the value of the firm will also be covered (Acharya, et. al., 2013). The research work emphasizes on the in the in depth analysis of corporate valuation based on the criteria of private equity and corporate governance. The purpose here is to identify the importance of equity funding in the overall performance of a firm and the benefits of private equity funding in the long run. The work of Kaplan is mainly used for this literature review (Kaplan & Stromberg, 2008). According to his opinion it was observed that leveraged buyouts (LBO) in the UK were significantly high before the recession period that started since 2010. Buyouts are a way by which funds can be invested in a firm. Buyouts are a type of private equity investment. It has been a matter of debate between many experts to decide whether it is buyouts that create greater value for the firm or is it equity investment in general. However research has shown that private equity only leads to short term gains where as buyouts have been seen to provide companies with