{"id":2861,"date":"2020-03-23T17:56:50","date_gmt":"2020-03-23T17:56:50","guid":{"rendered":"http:\/\/localhost\/2020\/swoopMW20\/?post_type=knowledge-hub&p=2861"},"modified":"2021-10-08T09:23:15","modified_gmt":"2021-10-08T09:23:15","slug":"special-situations","status":"publish","type":"knowledge-hub","link":"https:\/\/swoopfunding.com\/za\/knowledge-hub\/special-situations\/","title":{"rendered":"Special situations fund"},"content":{"rendered":"\n
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\n \n What is special situations fund? <\/a>\n <\/h5>\n <\/div>\n\n
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Special situations; are unusual or one-off events (including rumours and news stories) that mean the market is less able to value a business properly. These events include spin-offs, mergers, bankruptcy, litigation, succession or shareholder action. Special situations funds are equity funds that look to exploit these events by buying equity in these businesses.\u00a0
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Special situations funds come under the banner of\u00a0private debt<\/a>\u00a0funds \u2013 your investors (e.g. hedge funds, private equity companies and other intuitional investors) will usually take a controlling stake in your business.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Why choose a special situations fund? <\/a>\n <\/h5>\n <\/div>\n\n
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Special situations funds are considered by some to be the ultimate in \u2018active\u2019 investment and have come to be associated with a handful of star stock pickers \u2013 as a result they can be more marketing badge than a meaningful descriptor.

If you find yourself on the verge of bankruptcy, you might be forced to sell your debt obligations (as bonds) at a large discount. The buyer (investor) will usually end up controlling your business if you survive bankruptcy. The debt will then no longer be distressed and will therefore be valued at a much higher price.

A special situation does not necessarily forecast bad news for your business! It could be that rumours of a buy-out of another company might drive the value of the parent company up. Also, mergers and acquisitions could trigger event driven valuation fluctuations. There are investment funds dedicated to tapping into potential growth in this sector.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Have you also considered? <\/a>\n <\/h5>\n <\/div>\n\n
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Private debt<\/a> –\u00a0Private debt is an umbrella term that refers to debt products that are financed by non-bank institutions. Unlike publicly listed corporate bonds,\u00a0private debt<\/a>\u00a0products are usually illiquid and not issued or traded on public markets. Private debt (also known as private credit).\u00a0In a \u2018special situation\u2019, i.e. if your business is going through a significant change (or you are facing bankruptcy) you may welcome an approach from a\u00a0special situations<\/a>\u00a0financed by private debt
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Debt financing<\/a> –\u00a0Debt financing is a broad term that covers any type of\u00a0loan<\/a>\u00a0that you pay back, with interest, over a set period of time. A loan can come either from a lender\u00a0\u2013\u00a0see\u00a0business loans<\/a>\u00a0\u2013\u00a0or from selling bonds to the public.\u00a0If your business needs to raise money (capital) you can either borrow from a lender (i.e. debt financing)\u00a0

Equity financing<\/a> –\u00a0Equity finance refers to the capital an external investor injects into your business in return for a share of ownership (equity) and\/or some control of the business. Equity finance investors therefore have a claim on your future earnings but, in contrast to a loan, you don\u2019t pay any interest \u2013 nor do you have to repay capital.\u00a0If you opt for equity financing, you\u2019ll sell a stake in your business in return for funds.<\/p>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \n