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Private Equity – What It Is And How We Can Help

What Is Private Equity?

Private Equity. What is it?

The Harvard Business Review defines private equity this way:

“Private equity firms raise funds from institutions and wealthy individuals and then invest that money in buying and selling businesses. After raising a specified amount, a fund will close to new investors; each fund is liquidated, selling all its businesses, within a preset time frame, usually no more than 10 years. A firm’s track record on previous funds drives its ability to raise money for future funds. The CEOs of the businesses in a private equity portfolio are not members of a private equity firm’s management. Instead, private equity firms exercise control over portfolio companies through their representation on the companies’ boards of directors. Typically, private equity firms ask the CEO and other top operating managers of a business in their portfolios to personally invest in it as a way to ensure their commitment and motivation. In return, the operating managers may receive large rewards linked to profits if and when the business is sold. In accordance with this model, operating managers in portfolio businesses usually have greater autonomy than unit managers in a public company.”

You can read more about private equity in this Harvard Business Review article: https://hbr.org/2007/09/the-strategic-secret-of-private-equity.

PE Firms Might Be The Right Partner to Fuel Growth

If you’re on the hunt for a business acquisition, enlisting the help of private-equity investors could be the key to closing a deal.

There are pros and cons to any acquisition-funding strategy, including partnering with private-equity investors. If you need equity to buy a business, this type of funding could provide the capital and other resources you need to acquire and operate the business.

As with any source of funding, turning to private equity may or may not be your best option. There are many factors to consider, including the private-equity group’s timeline for a future exit, cultural fit, management oversight and execution strategy.

One thing is certain: private equity has the deep pockets to fund business buyouts. What’s more, many private equity funds boost their buying power with debt.

Evaluating the best source of acquisition funding requires careful examination and planning. Be sure your goals align and be prepared to evaluate the right strategy for you and the future of your business.

A recent article in the Wall Street Journal (https://www.wsj.com/articles/the-new-wizards-of-wall-street-1518611063) highlights private equity’s growing clout. Instead of turning to investment banks or co-investors, they are increasingly using their own balance sheets to finance deals.

Still, the article also flags the fact that there are potential conflicts in private equity’s new role as deal financiers. It’s important to understand how private equity managers get compensated and whether they remain in good standing with government regulators.

You can read more about private equity’s phases in this Harvard Business Review article: https://hbr.org/2016/08/private-equitys-new-phase

Support Services For Private Equity Operations

Good consulting expertise includes evaluating and working closely with private equity firms. If you’re considering selling your business or taking on an investor, make sure you get objective analysis, due diligence support and other resources; investment bankers aren’t typically objective (as they are representing either the “buy side” or the “sell side”), and having a representative on your team can ensure you’re getting objective perspective to make sure the deal, and the partners, are right for you.

If you’re looking for an operating partner to turn around your business (improve operating and financial results) we can help there, too, with more than two decades of experience advising on the startup, scale, growth, fix, and exit of businesses ranging in size from small to middle market to publicly held companies.

We have extensive background and proven results supporting private and publicly held companies, private equity, hedge funds, family offices and even angel funds and VC’s with objective analytics to qualify, operate, manage, control and exit their holdings.

We can advise private equity firms and candidate companies entering due diligence in need of the following:

• Rapid assessment of acquisition candidates
• Buy and sell side due diligence
• Interim C-level (CEO, COO, CFO, CRO (Chief Restructuring Officer) services
• Industry, geography, sector, specialty
• Strategy development
• PMI = Post Merger Integration
• Supply chain, vertical integration, MRP, ERP, e.g.
• IT Advisory and systems optimization
• 13-week cash flow/operations model and execution
• EBITDA and cash flow improvement
• Interim financing and cash-flow/receivables-based lending
• Streamlining, realignment
• Net Working Capital adjustment audits, evaluation of IP, inventory, assets
• Quality of Earnings/AR/AP/WIP
• Opinion letters

From a one- or two- day onsite rapid assessment to a deep and wide engagement requiring “objective perspective” running an enterprise, we can support PE groups with a long track record of results, professionals with extensive experience in a variety of industries and companies.

If you’re working on exiting your business to a private equity firm, we can function as an advisory partner to ensure an experienced and fresh set of eyes, to objectively advise as to deal structure, deal points, the IOI, LOI, and other key elements to ensure a successful transaction.

We Can Help

Need help growing, fixing, or exiting your business? Glad to help, call us at 239 919 7000 for a complimentary initial consultation or visit us online at qadentceo.com or qadentmanagement.com.