Realise The Power of Private Equity and Alternative Investment

WHAT TYPE OF COMPANIES ARE PE FIRMS ATTRACTED BY?

Inevitably, businesses which display the potential for investors to multiply their outlay will hold the most appeal. They will want to see they can take the company’s valuation from A to B in a certain timeframe. PE and alternative investment funds will be looking at opportunities that move the financial dial and show strong industry margins. A lot of PE firms are sector agnostic and are simply looking for strong businesses.

So, what does a strong business look like away from the financial side? Well, it needs to have a good management team in place – not necessarily the shareholders but a strong ‘C suite’ which they can work with to take it to the next level – and a clear vision of where the company is headed, in a marketplace where growth is visible. That would stem from either the PE firm having their own knowledge of that sector, or the company itself having those plans. For instance, if you can say ‘we want to advance into a different geographical market by acquiring a certain business’, to a PE firm that is a positive because they need to see that pathway of growth.

SHARE OF PE DEAL VALUE BY SIZE BUCKET

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

2021

2013

2017

2015

2014

2016

2019

2018

2022

2020

2023*

£2.5B+

£1B - £2.5B

£500M - £1B

£100M - £500M

£25M - £100M

<£25M

Source: Pitchbook

ARE THERE ANY EXTENDED BENEFITS FOR THE PE FIRM?

If they have existing investments within the same industry, most definitely.

Synergistic companies can benefit each other, whether that’s cross-selling to a client base or adding new lines to an existing product base.

You will commonly find synergies play a big part - PE and institutional investment firms commonly undertake a buy-and-build strategy because that is a way in which they can really maximize value. They are typically eager to buy a portfolio company with a strong client base and product lines and then acquire businesses which provide complementary products or services in different areas or for different clients.

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