Modern information technologies can radically change private equity transactions, and improve the basic performance of the organization. In this article, we will analyze the basic digital technologies to support private equity deals.
The common private equity trends
Today, in the context of globalization processes and technological development, more and more factors affect the economic situation in the world. One of the main steps to avoid the negative consequences of the country's economic activity is to analyze the consequences of attracting and using private equity. It is an international category of investment that is used to compile the balance of payments and determine the international investment position of the country.
Direct investment is beneficial in that it does not create external debt, generates job growth, usually entails an influx of new technologies and modernization of national production, contributes to the establishment of strong branched channels of economic cooperation of national firms with foreign partners.
So, let`s analyze the latest private equity technology trends with the help of which transactions can be made securely and transparently.
In recent years, private equity securitization has allowed to some extent to optimize transactions with this type of asset. At the same time, tokenization, which is a completely new method of making transactions, makes it much easier to buy, manage and sell assets. Tokenization involves the ownership of shares of private equity, represented by virtual tokens that exist on the blockchain. It uses the same technology as in the case of bitcoin and other initial offerings of tokens, adapted to meet the requirements of securities laws.
Tokenization is the process of creating a virtual token that represents a stake in private equity. Instead of formalizing the ownership of the legacy way on paper, investors get the opportunity to conduct transactions digitally using tokens. It is a fairly flexible tool. Tokens can represent a shareholding in private equity, a share in an enterprise that owns assets, a claim secured by private equity, a right to a portion of the income from private equity, and other types of rights.
Private equity tokens have several characteristics that allow you to implement this task:
- global investment pool;
- lowering the threshold for entering the market;
- standardized transactions;
It is generally accepted that blockchain technology, which is fundamentally the basis of SIP, can significantly improve the structure, management, and decision-making process in specific realities, making them less dependent on top-down coordination. It should be noted that in addition to decentralization as one of its key features, the blockchain differs in the object of its accounting and the technological solution for its implementation. We are talking about a high level of encryption, open protocol, distributed storage, the ability to transfer digital data between accounting addresses without intermediaries, which ensures the reliability and transparency of operations.
Due diligence virtual data room
The potential investor is interested in a quick return on his investment, and due diligence will help to find out how honestly the company conducts its business, whether it has made mistakes and violations that could lead to negative consequences for the company and the investor in the future. Digital data room provides better governance for investors. Thanks to cooperation in a secure workspace, it becomes possible to track transactions in the secondary market. In addition, the software also simplifies many other processes, such as paying dividends or holding voting.