A question that is regularly asked at the outset of a fundraising campaign is ‘How will my PE company investment affect my control of my business in the future?’.
It’s an important question to ask, and the implications should be fully understood to avoid any issues that jeopardise the success of the investment.
Private equity investment not only provides an injection of capital facilitate growth but often provides support in scaling the business up, most likely through introducing portfolio companies to their little black book of contacts, opening doors to important relationships and strengthening management with people who have ‘been there and done that’.
Different PE’s will have a different level of involvement in the business post-investment, ranging from enhanced reporting at various intervals, to an agreed non-exec placed on the company’s board as a representative of the PE company. As long as the investee company is comfortable with the format, the arrangement should remain positive and the benefits of the investment can be fully exploited.
A recent article from North West Business Insider emphasises the rewards to reap with a harmonious PE relationship, evidencing several success stories. Citing Kids Planet’s investment from Business Growth Fund, who grew from 17 to 21 sites within 12 months of a £10m investment.
Interestingly, the same article describes the expertise offered to a different company from an investing PE company as the most valuable contribution to the businesses ability to expand their operation. This shows that capital is not the be-all-and-end-all of an investment, with expertise and other resources that can be effectively employed demonstrating their importance.
It is worth noting at this point the influx of PE companies into the North West, and Manchester in particular, which has galvanised its position as the second-largest private equity market in the UK. This highlights the focus on the Northern Powerhouse and the quality of businesses in the area and it will be great to see how the increasing PE investment in the region will aid those businesses to fulfil their ambitions.