A Special-Purpose Vehicle (SPV), is a specialised entity, typically in the form of limited company,partnership firms, trusts or corporations that is created for a specific objective & purpose.
In the past, SPVs were typically used only by financial institutions and Organizations focused on large infrastructure & projects. It allowed a parent company to make highly leveraged or speculative investments via their SPV without endangering the entire company. However, lately it has gained huge traction & adoption for Strategic initiatives that includes Growth, Expansion, Innovation, Digital & Business Transformation
A new way of Strategic investments
An increasingly popular method when it comes to investments is to use an SPV to help all stakeholders put forth or extend strategic & tactical investments and receive their intended returns.
With an SPV based approach, various Sponsors, Shareholders, Investors, Bankers, Consultants, Prime Vendors and Customers band together as a syndicate to put in their respective investments & interests in various forms into an vehicle that extends it to the specific purpose. That entity collects the pool of co-investors under one capitalization.
Aspects & Benefits of SPV's
For Startup Investments
As the company on the receiving end of an SPV investment, having it as an investment vehicle means that the company technically only needs to deal with one investor (ie the SPV company) driven by experienced professionals meant for the defined objective. The company at recieving end of the SPV investments can use these investments in various forms (Equity, Debt etc) based on its well defined objectives. Moreover, startups can attract focused co-investors who are likely to be benefited more with the startup's products or service. This could make the investments more meaningful for all stakeholders.
For Shareholders & Sponsors
Creating an SPV allows companies to legally isolate the risks of an investment, and then share this risk with other co-investors. Companies can take advantage of this model for many of their Strategic investment initiatives including Innovation and R&D where lot of experimentation is under way and companies want to mitigate the risk of their investments. Certain types of assets can be hard and tedious to transfer. By creating a SPV that owns an entity’s assets, transferring assets can be done by selling it as a whole.
Being part of an SPV helps Enterprise Clients to manage & deploy their strategic investments in a better manner with risk sharing with larger ecosystem, that can ensure business outcomes better. It gives Enterprise clients a better framework to control their investments for such initiatives in a more focused manner. Assets can be better retired, refreshed or realigned for transformation with an SPV for the flexibility it provides, to create a spinoff or a spin-in based on the business objectives & larger strategy.
SPV Programs with HARAA Labs
HARAA Labs helps create Investments & SPV's for Chosen Business Objectives to mitigate risks and achieve faster Financial & Business outcomes across various Divisions, Departments, Business Processes, Business Units (SBU's) and Subsidiaries.
Legally, it can be limited partnerships, limited liability companies, trusts or corporations. There are no special requirements to create an SPV in countries like Singapore, Dubai, Qatar or US that differentiate it from incorporating any other company as it’s merely a vehicle- it all comes down to the intent of the participants about how they wish to use it.
With a strong PMO and Financial Modeling constructs, SPVs can be a useful method to get investments and interests in various forms for expansion, growth, R&D, Transformation etc and as well mitigate risks. To evaluate more about our SPV Programs for any of your strategic initiatives, write to us at email@example.com
Lately SPV's have gained huge traction & adoption for Strategic initiatives that includes Growth, Expansion, Innovation, Digital & Business Transformation