Private Equity
There is a vibrant private equity community focused on SME businesses with a range of investment philosophies. In our view, most disposal processes should involve a conversation with private equity.
Why look at a PE transaction?
We like to present our clients with a range of options so that if they walk away from something, they are doing so in possession of all the facts.
The number of transactions involving private equity firms is increasing, and the pace does not seem to be slowing. There is plenty of cash to support buyouts and development capital deals for attractive businesses.
Investment from private equity can be a great way to enhance a business’s competitive edge and capabilities for innovation.
There are three principal reasons shareholders choose PE over other forms of transaction:
- Different set of exit options for shareholders.
- Intense competition for good quality opportunities.
- Provide capital and expertise that serve as a powerful catalyst for growth.
What are PE houses looking for?
Your business needs to have some of the following characteristics to appeal to private equity:
- A track record of growth
- Strong growth potential
- Have an established and repeatable formula for growth
- A committed management team
- Be operating in growth markets
- Have good cash flow
- Have secured revenues or strong levels of repeat business
- A clear business plan
- An ability to consolidate a market with acquisitions
- Great systems
- Good corporate governance
- Have an obvious buyer or buyers at a future date
Few businesses have all these characteristics, but a private equity investor will need to build on some of these foundations. Private equity investors in the SME space must be able to add significant value beyond money. They are likely to have sector experience, access to talented non-executives together with experience of building businesses.
Ultimately all private equity investors are looking for their investment to grow. A typical investment period is 3 to 5 years although some investors will look at longer time frames. As a guide, a private equity investor will look to generate a total return of 2-3 times their investment.
Get in touch to see how our expertise can help you with your Private Equity transactions.
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