PE Insight: Finding your ideal private equity match
March 30th 2016 | Posted by phil scott
Finding your private equity match
Private equity backing is a tried and trusted path to business growth. A lack of funding is often the biggest obstacle to an organisation elevating itself to the next level and investors are a natural fit. Beyond that, they bring experience, contacts and other intangible resources useful to push a business forward. But perhaps in this more than any other business relationship, it’s crucial to find a suitable match. Private equity is more than finding investors with the right size purse, and overlooking this fact can end up hurting an organisation’s prospects more than helping, risking the investment in the process.
Look beyond the size of the investment
Seeking out a private equity partner includes, but should not be limited to, finding a partner willing and able to invest the right sums of money.
A great private equity match will have experience with a company of your size, stage of growth and will have already worked in your industry.
Not only does this mean you’ll be able to tap into their accumulated expertise and be able to secure introductions to invaluable connections, but it’s also a great sign that they’re genuinely interested in what you’re about.
Match personality and values
Private equity backers help organisations grow, but growth means different things to different people.
For some, it’s merely pounds and pence and if you’re both looking to grow exponentially and make lots of money then that’s great. To others, success is also about creating, innovating and contributing. If this is your vision, then it’s crucial to find backers with the same beliefs and values.
Maybe you have your own definition. A good match even goes beyond defining the end goal, and can also be about the ways and means of achieving it. A mismatched view of the end game can cause fractured relationships and boardroom strife.
Securing investment will include selling your best self to prospective candidates. But no matter how keen you are to land the cash, don’t be tempted to over-promise, omit crucial information or to tell outright untruths.
The pledges you make will be the difference between falling short of requirements and exceeding expectations, disappointing your investor or that satisfying feeling of picking up the phone to announce you’ve hit all your targets.
Be honest, and your investment partner will be able to help you reach your goals. Be more conservative with the truth and you risk fall-out including voided contracts, or other, much more serious repercussions.
If you can find a well-heeled investment partner that’s in love with your mission statement, then you’ve hit the jackpot. For the rest, there’s almost certainly going to be a series of negotiations before anybody’s signature is committed.
Decide what parts of the agreement are set in stone and others where you’re more flexible.
Private equity is a two-way relationship. Both sides want to see the company flourish, but the investor needs the right mix of risk, returns and rights to justify their time and money. What may seem like a golden offer to you may not always look like the perfect opportunity from their vantage point.
Don’t throw away a great chance of getting a deal done by being too stubborn over a detail which, in truth, is not that important to your or your team.
But not too flexible
Don’t get blinded by the pound signs. The promise of a sizeable influx of cash can put you a step closer to realising your organisation’s dreams, the culmination of everything you and your team have worked for.
But no matter how appealing this seems, no matter how hard you’ve worked to get to that point, don’t sacrifice too much to seal the deal. It’ll only seem like a pyrrhic victory as the working relationship begins to play out and the company you’d worked to build evolves into something you don’t recognise.
The UK has a wealth of private equity investors in an array of shapes, sizes and suitability. If the deal on the table doesn’t meet your requirements and it seems like no middle ground can be reached, be willing to walk away and seek out an alternative. It’ll be to the benefit of you, and the investors.