Private Equity

private equity financial services chart

Uses

Businesses look at Private Equity (PE) for a range of reasons:

  • Start-up funding – normally accelerating a proven model (not a start up from scratch)
  • De-risking – sometimes owners have gone a long way to getting a business performing and they want to “take some money off the table” and they are happy to sell an amount of shares to a third party
  • Extra capital – normally a business will look at leveraged or structured debt options and then look to PE as a new source of funding.
  • Additional skills/market access – in addition to the capital, PE companies have a range of skills and potentially complementary investments that could accelerate growth

Considerations

  • You’ll have someone to answer to, or at least involve in how the business operates – it is normal that a PE investor will want to be involved in board meetings and will have voting rights.
  • What is the longer-term plan? PE are not long-term investors, i.e. they will want to exit in a 3 to 5 year timeframe at a multiple of their investment – what will this look like?
  • Preparing a quality investors pack is essential, typically there is the first “teaser” as an anonymous couple of pages with outline info to assess market appetite. 
  • Interested parties can be screened and those that are a good fit would be provided with. 
  • An investors pack normally involves accountants preparing the financial due diligence (three year historic and three year forecast numbers across a range of circumstances) and lawyers providing Legal Due Diligence (LDD). The pack also answers the majority of qualitative and quantitative questions around management, client base, supplier base etc before they are raised.
  • Preparing for PE investment can cost upwards of £30k.

The private equity environment is diverse and quality contacts are essential – typically investors are only interested in their specific sectors, so knowing who “plays” where saves a lot of time.

We have the right contacts to help you and can help you both prepare for finance, screen investors and secure a good deal.

We’d be happy to talk to you, contact us here or email us: hello@fundingfriends.co.uk.

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