Private equity

Funding that is free from the constraints of asset ratios and cash flow cover etc. comes from private equity. PE investors focused on development capital normally seek to invest in a minority position and all, or substantially all, of the invested capital will remain in the business to fuel growth.

Private equity as a development capital solution compared with debt is more expensive. It is, therefore, used only where a proposition carries too much risk or the business has too few assets to be able to use a debt-only solution. Applied correctly, however, the returns to the owner-manager of using such funding should make the cost more than palatable.

The further benefit of using private equity for development capital is the added expertise brought to your board by the investing team and the Chairperson they will inevitably require is appointed. Private equity houses compete for deals not only on the pricing of their capital, but also the value they can add to the business through their experience and networks. They will be actively and regularly involved in your business so you have to get on; the chemistry has to be right.

Investments are made as a mix of equity and loan notes (a form of debt). The provider will be looking for a multiple of their investment returned in typically 3-5 years. Funds requirements differ so finding the right fund for the business and the owner-manager is essential.

Advantages

Accelerate growth

Private equity allows you to invest in higher risk business plans, develop knowledge-intensive areas of your business or invest in speculative areas, such as marketing, all ahead of the curve when compared to many debt solutions.

Add expertise

Every private equity deal is the start of a relationship between the equity provider and company, and it can be a rewarding one. With aligned interests to grow value, the equity provider will offer access to their experience and networks to help achieve the plan.

Release value

Most providers of private equity development capital will allow owner-managers to realise an element of their equity interest. This lets them access value in their business in a tax efficient way and partially de-risk.

This is for you if...

You have an established business but are looking to make a significant investment to drive a step change in performance with heavy focus on people and technology.

 

To find out how we can help you, contact Jim Shaw.