Typically three types of investor: Venture capital or Angel investors; Private equity capital or large buyout groups.
Mid-market private equity firms, like Gresham PE, look to invest in profitable and proven businesses with an enterprise value of between £10-100 million.
These investors can vary by sector and how involved in the business they are and provide development capital for product/service development or market expansion , management buyouts either to aid management teams acquire their own business or to provide partial cash-out for founders allowing them to de-risk some of their investment or capital for buy and build strategies.
Key advantages and disadvantages of private equity:
- Advantages of private equity finance
– Introduces a formal board process with more thorough structure, details and targeted KPIs
– Help and advice from external experts and specialists
– Help with businesses development to facilitate growth and expansion
– If required private equity professionals can help with the day-to-day business and with acquisitions
- Considerations for Private equity finance
– Can be a strain on personnel and operations especially during the investment process
– Deals can include bank debt and private equity loan notes which place additional financial constraints on the business
– Unless properly communicated, the perceived timescales of between 3-5 years can create an era of uncertainty within a business
When considering raising private equity finance all advantages and disadvantages need considering.
A clear and coherent business plan needs to be agreed and forecasts need to be realistic and demonstrably achievable.