When might be the right time to look for private equity investment?

Private equity investment can offer significant benefits for owner/founder led and independently owned businesses looking to access capital and accelerate growth. Private equity firms provide not only capital but also operational support, industry expertise, and strategic guidance to help companies reach their full potential. Private equity investment can also provide companies with access to a wider network of investors and resources, which can be invaluable in driving growth and innovation.

While private equity investment may come with risks, the potential benefits make it a compelling option for many ambitious companies looking to take their business to the next level.

What are the risks and rewards?

Private equity investment can provide SMEs with access to significant capital and operational support, as well as a wider network of investors and resources. This capital can be used to fuel growth and innovation, expand product lines or service offering, and invest in research and development. Private equity firms often have extensive industry expertise and can help SMEs navigate the challenges of scaling their businesses and achieving long-term success.

However, SMEs must carefully consider the potential risks of private equity investment, including loss of control and conflicts of interest. Private equity firms typically require a significant ownership stake in the companies they invest in, which can result in a loss of control for the original owners.

It’s also important to remember that private equity firms are motivated by a desire to maximise returns for their investors, which may not always align with the long-term goals of the SMEs they invest in.

But, a successful PE investment strategy is one that supports the owner founder, ensures they have the right senior leadership team in place and enables the business to achieve its growth targets.

Is your company ready?

Private equity firms have specific investment criteria that they look for in companies. These criteria may include a strong management team, consistent revenue growth, a clear path to profitability, and a scalable business model. Before pursuing private equity investment, it is important to assess whether your company meets these criteria and if private equity investment aligns with your long-term goals.

Strong financial performance is a key indicator that your company may be ready for PE investment. PE firms typically seek out companies with a proven track record of revenue growth, profitability, and financial stability. If your company has a solid financial foundation and a clear growth trajectory, it may be attractive to PE investors.

If your company operates in a high-growth industry, has a differentiated product or service, or has identified untapped market opportunities, it may be well-suited for PE investment. It is important to be realistic about your company’s growth potential and have a clear strategy in place for how you plan to capitalise on market opportunities.

Ultimately, the decision to pursue PE investment should be based on a careful assessment of your company’s financial performance, growth potential, and overall readiness for this type of funding. Many businesses looking for PE investment will need a strong individual in their finance function. This individual will work closely with the owner founder and experienced advisors who will seek out PE firms that align with your company’s priorities.

How Rowan Group can help

Our in-house expertise, experience and contacts within the PE world mean that we are ideally positioned to guide you through this often-complex process and to match you to the optimal PE house for your SME.

Contact us to find out more about our expert private equity services.