Why Private Equity.
As a business owner it’s important to know your options
It’s simple.
“The fundamental reason behind private equity’s growth and high rates of return is something that has received little attention, perhaps because it’s so obvious: the firms’ standard practice of buying businesses and then, after steering them through a transition of rapid performance improvement, selling them. That strategy, which embodies a combination of business and investment-portfolio management, is at the core of private equity’s success.”
(Harvard Business Review)
The second bite of the apple.
The groups we work with allow you to invest back in and with a high X average return on invested money the second bite often exceeds the initial liquidity event.
Exploring partnerships with private equity (PE) groups presents distinct advantages when contemplating a business transition. Such alliances facilitate value creation throughout the transition phase, empower owners to retain control, and sustain the momentum of business growth.
Evaluating the viability of this partnership entails considering factors like your exit strategy, the investment horizon, leverage, and the level of control afforded by the PE group.
Choosing a financial partner is a pivotal decision for any owner, influencing both returns on investment and entrepreneurial reputation. While strategic or direct competitors often emerge as potential buyers, the prospect of partnering with private equity is frequently overlooked.
What sets private equity buyers apart?
Unlike strategic buyers, PE firms seldom seek full acquisition, preferring instead to collaborate with existing ownership or management teams throughout their investment tenure. Typically, PE groups aim to acquire stakes ranging from 51 to 90 percent.
For many owners, the option to sell a portion of their business holds allure, particularly when their net worth is closely tied to the company's value. While liquidity is a priority, outright sale may not be preferable.
Private equity arrangements enable owners to unlock wealth while retaining operational control and fostering continued growth—a strategic move akin to safeguarding some assets while furthering business expansion.
Driving growth through private equity
In scenarios where capital infusion is crucial for expansion but individual risk aversion prevails, a partial sale to a PE entity emerges as an optimal solution.
PE firms not only offer liquidity for existing owners but also inject additional capital to bolster growth initiatives, leveraging resources often beyond the owner's reach.
Post-transaction, owners typically engage in a transitional period lasting one to three years, particularly if they are deeply involved in day-to-day operations. Such arrangements often tie a portion of the purchase price to this transition phase.
Partnering with a PE group enables owners to continue value creation during this transition, potentially leading to a subsequent liquidity event of even greater magnitude.