At our NWFD Manchester event in March one of the workshop topics that our FDs discussed was private equity finance. Adam Rudd of Gresham Private Equity fed back the views of his group.

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.