SCENARIO A. (This is background information. See below for the specific questions) A group of investors led by Investitori Associati (a European private equity fund) bought Savio SpA (an Italian textile machinery manufacturer) from its parent ENI (a state-owned energy group) in an auction for a total valuation of 75 million euros. The transaction was financed with 50 million euros worth of debt supplied by Comit SpA (a finance company) and 25 million of equity. Investitori Associati held 42% of equity, Comit held 30% and the new management team as a whole held 8%. Since Savio played a major role in the economy of the area around Pordenone, two local entrepreneurs bought the remaining 20%. The management team was also given stock options at a preset price exercisable at the time of the sale of the company. The amount of options granted depended on the internal rate of return realized by the investors. As part of the transaction, Investitori Associati had insisted on a variety of control rights. In addition to receiving pre-emptive rights to provide future financing and a variety of other protective covenants, two of the partners of Investitori Associati received board seats. In addition, Investitori Associati also provided consulting services to Savio concerning its corporate strategy. Two board seats were assigned as well to representatives of Comit.

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(4 marks) Refer to Scenario A above. Why did Investitori Associati insist on having (a) pre-emptive rights to provide future financing AND (b) board seats?