New company type help?

[OddBall121104]

Hello,

I've been involved in the world of private equity for about 10 years now, and have always dreamed of starting my own company, saving most of my wage and bonuses during this time - especially in lockdown. I've even managed to convince my twin brother (who works at the same private equity group I do) to save his wages and bonuses and join me in this venture.

Now, I've got enough money to start my own company, but I'm not 100% sure what to class it as.

Using my experience in a private equity group, I'd like to start a company along those lines (specialising in investing in distressed companies, injecting them with lots of capital and then selling them to a competitor for a huge profit). But, instead of raising capital from outside investors, I'd like to use the money my brother and I have saved to invest and only use the profits from our ventures and any money we raise from bring on future partners (when or if that ever happens).

What kind of business is this? A private equity group? A private investments group? Something else? Also, would this kind of company require FCA regulation/oversight?

 

[Ian J]

Using my experience in a private equity group, I'd like to start a company along those lines (specialising in investing in distressed companies, injecting them with lots of capital and then selling them to a competitor for a huge profit). But, instead of raising capital from outside investors, I'd like to use the money my brother and I have saved to invest

Forgive my naivety but would that idea actually work as most distressed companies are in that position for reasons other than lack of capital and pumping more capital in just gives them more money to lose.

I used to work for a company that did something similar as we got involved in distressed SME companies, providing them with funding and management help and every single one of them failed leading ultimately to the failure of the company that I worked for

 

[Scalloway]

To follow from what Ian says you need to understand the reasons the company is failing. Some suggestions are:

• Poor management
• The market has moved but the company hasn't moved with it
• Poor credit control

Unless the fundamental problems are solved you are just throwing good money after bad. I used to work for an organisation that funded local businesses and saw this happen more than once.

 

[The Byre]

most distressed companies are in that position for reasons other than lack of capital and pumping more capital in just gives them more money to lose.

Or as Warren Buffett said, "It is better to buy a good company at a fair price, than to buy a fair company at a good price."

If you and your brother have money saved up, I'd be looking to buy something like gold to preserve value in the coming financial storms that are all too obviously heading our way. The last thing I would want to be stuck with is somebody else's stupid business mistakes!

Everything will hit simultaneously. The storm clouds are undeniable - Chinese housing correction, stock market correction, inflation, property prices falling, governments defaulting on debt, private debts everywhere becoming delinquent - not the time to be doing anything other than hanging onto value!

Your savings right now are losing value at well over 5% p.a. Convert now, wait a year or two for the storms to pass and then walk out into the deserted ruins of industry and commerce and start looking for real value bargains.

 

[Frank the Insurance guy]

would this kind of company require FCA regulation/oversight?

If you are purely using your own money, you should not need any FCA regulation. However, this will change if you are investing other peoples money.

 

[Mark T Jones]

To reflect much of the above, throwing money into a bad business usually results in that business going bust with more debt

If you are shrewd, it might be asset stripping or turnaround

Otherwise it's just known as a money pit

 

[Financial-Modeller]

OP, there is quite a disconnect between the role that you are projecting, and the questions that you are asking.

If your questions are genuine, you have a lot to learn before you should start buying companies.

 

[Lisa Thomas]

If you decide to go ahead with this, you might want to register with agents used by Insolvency Practitioners to get notices of insolvent business for sale.