If your business is looking for Private Equity investments, it is important to remain open-minded. Here we focused on the business benefits from Private Equity, and how partnering with one can benefit business owners who have reached their top in terms of building their company’s value. Moving forward, your business may look for external help from PE to avoid a complete exit.
Today, PE investors make acquisitions that will add value to their portfolios. Typically, they won’t buy a business unless they can contribute to and accelerate, the company’s growth potential.
What’s more, PE firms are holding onto their investments longer, often seven years or more. For sellers, this longer turn time provides assurances that their employees will have a role in the new business and growth opportunities.
An example of Private Equity investment can be seen in the sale of Agrekko, a world-leading provider of mobile modular power, temperature control, and energy services. Agrekko signed for $2.79 billion with TDR Capital and I Squared Capital. Another take-private focusing on perceived weakness in UK public market valuations. Aggreko was severely hit by the pandemic. However, sponsors saw an opportunity to reposition the business to benefit from the transition to clean energy and net-zero objectives.
What are the key business benefits of Private Equity?
One of the first and far most obvious benefits for your business is the greater investment of capital into areas of your company. That said, PE groups have deep pockets and can provide the financial resources to fuel growth. These firms may provide the capital needed to renovate a facility, buy new equipment or launch a marketing effort.
PE investment can help your business to expand operations and increase brands awareness in new or existing markets. An example of this is the Agrekko deal. This is where with guidance and reposition of the business, Agrekko grows beyond its pre-existing means.
Moving forward, Private Equity can offer you expertise and connections. The right PE firm is your path to a new community of peers and valuable business connections. They provide experts who will roll up their sleeves and work alongside you. Similar to other investments, PE firms want to know your management team is here to stay with all their expertise.
PE investments are often in middle-market companies that have expanded as far as their current resources and management team can take them. For example, these companies can team up with a PE firm that provides access not only to capital but also to a wealth of invaluable resources. A private equity sponsor can leverage its extensive network to improve management, logistics, infrastructure and other essential components of a business that can take years to develop separately.
Private equity firms are experts at creating value. Also, a study showed that two-thirds of private equity deals resulted in at least 20 percent annual growth for the purchased company.
How can you take advantage of PE?
So, what can you do to take advantage of private equity investment? With demand high for middle-market businesses among private equity firms, the best is to start marketing right away. Furthermore, the market is crowded due to the retirement of baby boomer business owners. Therefore, private equity firms are urgently searching for new investment opportunities.
If your business can serve as a potential platform company for PE firms, take the opportunity to achieve your value. With effective collaboration and investment, all sides stand to benefit and generate more revenue in the long term.
We hope that the business benefit from Private Equity investors has brought some level of knowledge and insight to you.
Like any industry, there are still “bad eggs,” but an M&A advisor can help screen PE firms to make sure you’re working with a good group. VX Associates M&A Advisors will guide you every step of the way. Contact our M&A team to arrange a meeting.
