Private equity is perhaps best-known as a tool to either pull a company out of a slump or to accelerate a company’s growth. However, that is not all it has to offer. A private equity deal with the right firm can provide your company with the funds it needs to grow while also offering access to resources that are difficult or impossible to find anywhere else. Established businesses that are looking for support to expand, restructure or prepare for a liquidity event should consider partnering with a private equity firm for the myriad benefits it can offer in addition to capital.
The need for a substantial investment is usually the primary reason companies seek to partner with a private equity firm. If your company has cash flow issues or needs funds to fuel expansion, trading part of your equity for a cash infusion may be the answer.
Private equity firms in the United States have a lot of capital to invest. A 2018 report from Bain & Company showed that private equity firms have raised nearly $3.2 trillion over the past five years. In 2017 alone, they attracted $701 billion in investment commitments.
Private equity firms are positioned to offer more funding than other types of investors. For large firms, deals can total hundreds of millions of dollars. Your company may not need that level of funding, but if it does, it would be difficult to find it anywhere else.
Expert Advice and Consulting
With many of the funding options available to businesses, the investor providing the funds has little to no involvement in the company’s operations. Private equity firms, however, take a more hands-on approach with their investments. Since their returns depend on your company’s success, they provide guidance and resources to help maximize your value.
A great private equity firm will assist you in evaluating all aspects of your business to identify cost savings and growth opportunities. By partnering with an experienced firm, your company can benefit from their operational expertise and financial savvy. The right partner will work with you to develop and implement a strategy to make your business more profitable.
Industry Expertise and Connections
Like many financial sectors, private equity is becoming increasingly specialized. Many private equity firms have deep expertise working with companies in specific industries or verticals. These firms can leverage their industry connections and knowledge of market conditions to identify new opportunities for your business. With their experience, they can guide your company’s search for new markets or revenue streams.
In addition to bringing capital and expertise to their partnerships, reputable private equity firms also offer access to their robust network of connections. Firms that have decades of experience working in a particular industry or region have developed valuable relationships that they can leverage on behalf of your company. Their connections can open doors and introduce your company to new markets, clients, vendors or partners.
Guidance for a Turnaround
Private equity can be a great choice for companies that are recovering from a setback. With their success hinging on their partners’ profitability, private equity firms have every incentive to put your company on the path towards growth. Many firms specialize in turnarounds and have broad expertise in assessing a business’s operations and restructuring them to reignite growth.
Perhaps your company is currently growing but would benefit from additional funding that would enable you to reach your goals sooner. Partnering with a private firm equity firm can be a powerful driver for growth and expansion.
In a 2012 study conducted by the Boston Consulting Group, researchers found that more than two-thirds of private equity partnerships resulted in a 20 percent or greater increase in annual profits. Almost half of those partnerships boosted the portfolio company’s profits by more than 50 percent.
For companies that are considering selling to a competitor, a private equity investment may provide a more attractive alternative. Partnering with a private equity firm typically enables your management team to retain an active role in strategic decision-making. Your existing leaders can maintain a stake in the company while benefiting from the capital, resources and expertise that a private equity partnership offers.
When founders or early investors are looking to cash out of their companies, they often seek private equity investment. Partnering with a private equity firm can facilitate a sale or initial public offering (IPO) that will allow the company to restructure or continue to grow. An experienced private equity firm can help guide these exit decisions to ensure that the company’s next chapter is a successful one.
If your company is considering going public, partnering with a private equity firm may help better prepare your business for an IPO. In a private equity-backed IPO, new private investors are brought on to buy out a portion of the equity before the company goes public. These investors then receive a return on their investments from the profits generated by the sale of public stocks. The private equity firm, thus, has a vested interest in ensuring that the IPO is as successful as possible.
While private equity firms, like all businesses, are interested in generating a profit, their partnerships are often mutually beneficial. They work to increase the value of their partners because their success hinges on those companies’ growth. Whether your company’s goal is to expand, accelerate growth, restructure or go public, partnering with the right private equity firm can create a win-win situation.
At HJR Global, we specialize in helping businesses obtain capital for their business needs. Click here to learn more about obtaining a private equity investment.
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