Many people considering selling a business overlook the option of private equity investment. Common fears include loss of control of the business they built, thinking they’re working for someone else, and the erosion of long-term growth for short-term gains. However, there are many benefits to private equity investment. Let’s look at a few of the greatest advantages of partnering with a private equity investment firm.
You Receive the Best Value for Your Shares
Private equity investors offer a significant influx of capital to the firms they invest in. They can offer a reasonable price for your shares or equity stake. Furthermore, you can receive a fast influx of money to take advantage of an opportunity or resolve a cash crunch. In some cases, they save firms from bankruptcy. However, they won’t take your business apart to recoup their investment. They’re investing for the long-term, often with a 10 to 20-year horizon.
You Benefit from Their Market Expertise
Private equity firms tend to specialise in a particular industry or vertical stack, seeking to combine several related businesses into an efficient chain. They bring in experts to better market a business, improve efficiency and take your business to the next level. The XIO Group, for example, is focused on fintech and agribusiness. They’re familiar with the mergers and acquisitions market, and they could merge your business into another similar firm or help you partner with related firms. At the same time, they’ll help you balance risk and rewards, and they will give you expert advice when assessing competing opportunities.
You Retain Control
If you sell an equity stake to another investor, you may have to add them to the board or involve them in decision making. This is why many business owners are afraid to bring in private equity investors. However, private equity investors rarely take a direct role in the business, although they may buy most or all of your company’s shares. You can continue in a managerial role if you so choose. Yet you’ll gain their expert advice as well as their financing. They’ll work with you to create a clear strategy and stable growth plan, not toss out current leadership and radically change direction. However, you aren’t working for someone else – you’re working with a new partner who will be as involved as you want them to be.
You Control the Timing
An equity firm could help your business grow after you’ve hit your limit, allowing you to stop working 80-hour work weeks. They can buy your equity when you’re ready to cash out. This could be the best solution for a family business with no heirs or a founder who wants to retire instead of working until they pass. This could also solve a financial crisis created by divorces, lawsuits, and the need to liquidate a company to pay the heirs. Conversely, they could help one person be bought out while aiding those who remain in leadership to grow the business.
The long-term time horizon of private equity houses also allows you to plan for long-term growth and acquisitions. You could receive their capital influx today to stay in business and know that you can buy up small rivals in a few years.
Private equity investment firms often have a bad reputation in popular culture as exploitative, greedy, and just bad. However, this common narrative is far from accurate, and there are many benefits of working with a private equity investment firm, so always make sure that you consider the option.