What is private equity?
The majority of private equity investment consists of institutional investors and accredited investors who can invest large sums of money for long periods of time. An investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Each of these categories of investor has its own set of goals and investment strategies. The money can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.
Why would I want it?
You may wish to partially sell your company whilst retaining some equity, you may want to take it easy and let others take control of the company or you may want to fast track to a much bigger business with a possible public listing at the end. There are many reasons why a private equity arrangement can work for you.
How does it work?
A private equity fund invests in your company and looks to sell its stake about five years later for a substantial profit. Investments are normally into mature companies with high growth potential and have a proven track record. Private equity firms are much more hands on, and will help you to maximise all areas to extract the best growth, and therefore profit from the company.
What are the benefits?
The main benefits are that you get access to large amounts of finance that may not be available elsewhere and with hands on investors you will have experienced professionals involved that can bring about major advancements for the business.
What are the pitfalls?
You get much more money but normally have to give up a much larger share of the business. Private equity firms often demand a majority stake, and sometimes you’ll be left with little or nothing of your ownership. It’s a much bigger trade, and it’s one that many business owners will baulk at. Also by having a private equity investor on board who is taking a hands on approach there is a chance that their ideas for expansion do not match yours and this can lead to conflict.
WHERE CAN I FIND MORE INFORMATION?
Our featured equity investment firm, Perwyn LLP have answered many relevant questions, view them here
PRIVATE EQUITY PARTNERS
Perwyn LLP is a family funded investment firm carrying out private equity style investments however with a degree of flexibility that only an entrepreneurial family investor can offer.