However, without the right type of support, rapid growth can be a real challenge for any business. While growing organically can get you so far, a business often needs an injection of funds to give it that all-important step change and it’s here that private equity can make a real difference. A private equity partner offers a reliable source of financial support and brings added operational expertise to the table, which can have a transformative effect and help to turbocharge growth.
For the many high-quality firms seeking investment, it’s important those looking for investment have a handle on the different funding options available. Bringing a trusted private equity partner on board is not a snap decision but there are steps management teams can take to help attract the right investment partner.
Creating a robust business plan is the first place to start. This may seem obvious but is perhaps the most vital and commonly overlooked step by management teams. Firms should have a clear vision, a solid understanding of the growth opportunities over the next two-to-five years and a clear strategy for how to capitalise on these.
Scotland’s leading optical provider, Duncan & Todd, which has been backed by LDC since March 2018 did this particularly well. Its management team had a clear plan in place from the outset and knew how it would increase its national footprint through a buy-and-build strategy. The team had already identified businesses that would complement the Duncan & Todd Group, which meant it could kick-start its expansion plan quickly with the acquisition of Dempster Opticians.
Secondly, management teams need to have their house in order and ensure the books are in good shape. It’s important to show forecasted profit and revenue growth and be able to stand up to the rigours of due diligence from any potential investor.
A prospective investment partner will also look for a clear management structure and a team committed to the growth of the business. Having this structure in place will reassure investors that the leadership team is committed and able to deliver on plans. For those business owners looking to take a step back after investment, having a succession plan in place is just as important and gives an investor confidence that the future growth of the company is in safe hands.
It is also important to set a business apart from its competitors – this helps to demonstrate growth potential. To do this, the management team needs a clearly defined market proposition. This is a key differentiator for those looking to invest and showcasing a firm’s expertise or capabilities in a specific area will help attract the right investment partner – often one that has a track record of delivering growth in this area.
Management teams should also engage the support of quality advisors. The right team of consultants, corporate finance advisors and lawyers are instrumental in any investment process.
Lastly, it’s important not to rush into a deal. Any good investor will spend time getting to know a management team, what drives them and what makes a business tick. This is a two-way street, and management teams should make sure they’re comfortable with the investing party. When a private equity team and business fit together perfectly, it transforms a business.
For business leaders with big ambitions, the backing of a private equity investor can provide the essential financial support and strategic partnership required to turbocharge a business’s growth strategy. Having a clear vision for the future, a winning management team and a structured plan to make ambition a reality is crucial to attract investment.