With the right support in place, raising money in the capital markets may be more effective. A private placement agent is hired to help clients find private financing options. Institutional investors, such as private equity or real estate firms, are frequently among these clients. A private placement agent could also help corporations, such as start-ups, raise funds for expansion or to continue operations. Once investors have been identified, a placement agent attempts to secure a financial commitment from them, and if a promise has already been made, the agent may try to increase the investment’s value.
Private placements are common in the private equity world. A private equity professional raises funds for an investment portfolio with a specific strategy in mind for the fund’s future direction. A private placement agent could be hired to assist the company in raising funds by locating investors for a specific fund. He or she should have strong industry connections with institutional investors, such as pension funds, endowments, and financial services firms. Agents should assist private equity managers in setting investment fund goals so that logical steps can be taken to meet those expectations, such as attempting to close a fund to new investments by a specific date.
A private placement agent must be at ease marketing a client’s investment product to other institutional investors in order to be effective. This entails determining which investment funds are best for which investors. Certain investment funds, for example, may be better suited for insurance companies, while others may be better suited for corporations and wealthy individuals. A private placement agent values a client’s time by avoiding unproductive conversations by matching investment funds with only the most appropriate potential investors. A placement agent should be able to contact an investor again when a private equity fund raises a new investment portfolio in the future.
A placement agent would seek capital from venture capital firms that invest in start-up businesses for a private corporation. An agent may also assist a startup company in obtaining mezzanine capital, which can be either debt or equity. The funds could be used to fund operations, expand, or strengthen a company’s balance sheet.
The greater the range of services provided by a private placement agent, the more business that individual is likely to generate. For example, a placement agent with global experience can provide greater exposure to global capital to investor clients. During changing economic cycles, when asset classes come in and out of favor, a professional with experience raising money for real estate funds, private equity, and private corporations could benefit the most.