Is private capital appropriate for your business?

If you have a revenue-generating business that has been operating for a few years and you are interested in taking it to the next stage of growth – whether it is some injection or a complete overhaul – then consider investigating collaboration with a private equity investor.

First of all, what is “private equity”? In short, it is financing provided by investors in exchange for an equity stake in the company. This type of financing is generally associated with mature companies with growth potential in need of regeneration. A wide range of industrial sectors benefit from PE such as technology, industry, healthcare, banking and finance and more.

People are often confused about the difference between private equity and venture capital. Venture capital is actually a form of private equity, but the main difference is that it tends to finance younger companies such as start-ups and new companies.

Now that you know a little more, don’t stop there – there are plenty of resources out there that will teach you everything you need to know about private equity financing. This is only the beginning.

Once you’ve done some more research, let’s take you through what you need to do to acquire this type of financing for your business. The first thing you need to do to start your journey is to interview potential investors.

We understand how complicated it is to look for the right investor, so we’ve outlined some of the key questions to ask when trying to find the right investor to partner with in the long term:

  • How much control do management and shareholders have?

  • Will there be follow-on investments? If so, what are the conditions?

  • How experienced is the private equity firm in your sector?

  • Who are the most important contact points?

  • What will happen if both parties want to leave the agreement?

  • What are the costs of the company?

  • What is the investment horizon?

  • What does capital structure look like?

In addition to having these questions, we recommend that there is always a good lawyer present to negotiate on your behalf. You want to find a law firm with experience not only in investing in private equity, but they also need to have the commercial experience to be able to put themselves in management or the founder’s position. Choose your lawyers carefully and look for independent references.

Parabellum Investments is a specialist in the middle market, which only invests money acquired from previously successful investments. Our independent investment fund does not include third party investors such as investment committees or banks. This ensures faster operational processes and straightforward communication without having to consult any third-party investor, which is typical of a traditional private equity trade. If you would like to find out how we can help your business thrive, visit our website and get in touch today.