When trying to sell a company, most owners do not even consider private equity investments. The main concerns that are nowadays mentioned are:
- I do not want to work for somebody else.
- I will lose control.
- I will become employed as opposed to being self-employed.
Such concerns are not actually legit since private equity deals are much more complex and can easily help so many different companies to reach the next growth level. Marc Leder has a lot of experience with private equity investments and shares the main advantages that have to be known below.
Getting The Best Possible Value For Shares
Private equity firms have a lot of experience and can offer large funding amounts to the company owners that want to get a really good return on shares or simply a cash injection that will accelerate business growth. In many situations, the investment offers higher value than regular share sale. This happens because there is much funding that is available for the private equity firm. The companies that have a good growth potential are of interest. If significant returns are possible in the future, the firm will be interested to pay more than current market share to sign the deal.
Private Equity Investments Are Long-Term
A private equity investment is almost always focused on long-term returns. Contracts are signed based on returns for 5, 10 or 20 years. Having a really long investment horizon is beneficial for the company in so many different ways. The most important one is that investors wisely use time in order to create a solid growth strategy, one that preserves the current capital and minimizes risks.
There is this belief that private equity is always focused solely on fast returns. The truth is that the focus is put on the highest possible returns, which usually means a really long-term investment backed by a solid growth strategy.
The private equity investor is specialized in creating value. This is really important since most companies out there do not have such available expertise. Based on a case-by-case approach, the investors will customize strategies and will make the necessary tweaks to create the most possible value.
Direct Investor Involvement Is Minimal
Another myth associated with private equity investments is that the investor decides everything. The truth is that many private equity investors will take ownership of a really large part of the shares of a company. However, they do not take direct role in a business. The owner remains with the company and gets the extra benefits of expert guidance and extra financing.
Investors usually work with owners, helping them develop a stable growth plan and a strategy that will increase value and revenues. Then, they simply take back seats and allow owners to manage everything. Selling the business to the private equity firm does not mean that you are going to be employed by another company. Although it is normal to feel that you have a lot less value after the sale, in just a few years, shares are worth a lot more because the entire company is worth more.