Unveiling the Role of a Private Equity Expert

Last Updated: 

April 12, 2024

Sustainable growth is something businesses typically focus on. While quick growth spurts are always welcome, organisations tend to look to the future—this often means venturing into private equity, which can be an effective way of diversifying your portfolio. 

However, it can be a complex journey, and this is when private equity experts can help. Before scheduling a consultation, it’s a good idea to know what private equity is and how an expert can help your business meet its sustainable growth goals.

Key Takeaways on Working with a Private Equity Expert

  1. Understanding Private Equity: Private equity involves investing in privately-held businesses, offering infusion of cash for growth and support.
  2. Role of Private Equity Expert: Experts serve as intermediaries, handling investor communication and providing strategic analysis for business enhancement.
  3. Crucial Skills for Experts: Look for expertise in research, investment analysis, sustainability promotion, due diligence, compliance, and reporting standards.
  4. Signs to Hire an Expert: Consider hiring an expert early, irrespective of EBITDA, to prepare your business strategically for private equity.
  5. Benefits of Expert Guidance: Experts aid in capital infusion, talent acquisition, networking, cost reduction, innovation, risk management, and growth strategy development.
  6. Timing is Crucial: Seek expert guidance as soon as private equity becomes a consideration to align operations with investor expectations.
  7. Preparation for Future Growth: Early engagement with a specialist lays a strong foundation for investment readiness and sustainable business growth.
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A Look at Private Equity

Chances are, your business has an investment portfolio. Composed primarily of stocks and bonds, your portfolio is doing okay but it’s often not generating enough income to steadily grow your business. Some quarters are better than others, making it difficult to plan and meet long-term goals. While this doesn’t mean selling and trading your existing investments, it may be a sign it’s time to start thinking about diversifying.

This is when private equity often becomes a conversation topic. From boardroom meetings with stakeholders to watercooler conversations, deciding to plunge into private equity can seem daunting. This can be especially true when you’re not even sure what private equity refers to. So, what is private equity and how can it help support sustainable growth?

In a nutshell, private equity is shares in a privately-held business. In other words, the business stock is not publicly traded on Wall Street, so instead of shares being publicly traded, a few investors step in. They purchase shares in the business, which translates into an infusion of cash. Businesses can use these monies to grow their organisation. The funds can also help support existing business priorities.

When do the investments see a return? After the business grows and demonstrates its long-term sustainability, the organisation is often sold for a profit. Out of the sale proceeds, investors receive a portion of the profits. Typically, private equity investors receive their initial stake plus a profit.

The Role of a Private Equity Expert

Since you’re searching for investors for your business, this may seem like something you can do without professional expertise. After all, how difficult can it be to find a few investors? You hold a few meetings and maybe even throw a party and suddenly potential investors are willing to open their chequebooks. While this would be great if the private equity process is this simple, in reality, it’s a little more complex.

Your investors are going to expect you to take steps to ensure your business is eventually sold at a profit. Investors are also going to have questions and probably aren’t going to be afraid to offer unsolicited advice.

Before long, your investors are trying to dictate the best practices and processes for your company. Get ready for some conflicting opinions and even impossible demands. Now, all of your time is taken up by investors and you’re not focusing on growing your business.

Working with a private equity expert means you’re not responsible for communicating with your investors. Think of a private equity expert as a type of middleman. The expert is responsible for locating investors. The expert also analyses your business and provides recommendations for improvements.

Crucial Skills to Look For in a Private Equity Expert

Pretty much anyone can hang a sign on their office door proclaiming their expertise in the private equity field. However, an expert possesses certain skills that you probably don’t want to skip. A lack of skills can limit your business’s growth potential and reduce its margin of profitability. Some of the skills you want in a private equity expert or firm include:

  • The ability to conduct research for a better understanding of your business drivers.
  • Analyse new investment opportunities and provide research backing up their recommendations
  • Revise current business practices to promote sustainability.
  • Provide due diligence support in the form of valuations, assistance with document preparation, and creating business models.
  • Ensure the shares are properly sold by working with investors, company executives, and possibly PR firms.

You also want to ensure the private equity expert you choose is familiar with the compliance and reporting standards for your industry. For example, if you’re in the healthcare niche, HIPAA standards may apply to your business.

Signs It May Be Time to Hire a Private Equity Expert

If you do a little research, you’ll probably find advice recommending you wait to hire a private equity expert when your business’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) are between $3 to $5 million. However, these numbers aren’t set in stone. Even if your EBITDA is less than $3 million, it doesn’t necessarily mean you don’t need a private equity expert.

A better rule to follow is if you’re planning on taking the private equity option, it’s a good idea to start consulting with an expert early—this way, when your business is ready, the private equity expert has the groundwork laid out. So how can an expert help get your business ready for private equity?

  • Your business can receive supplemental capital while waiting for investors to come on board.
  • Help diversify your business by bringing in new talent and implementing innovative processes
  • Provide access to new networking opportunities and industry connections
  • Streamline operations to help lower operating costs
  • Help develop new services and products to boost the bottom line
  • Create effective risk management strategies by reworking network systems and infrastructure

A private equity expert can also provide invaluable insight into your business’s growth strategies. Whether you’re ready to pull the trigger or just starting to think about the benefits of private equity, an expert can help you find a viable path that supports future growth.

Is it Time to Work With a Private Equity Expert

To effectively navigate the complexities of private equity, it is crucial to seek guidance from an expert as soon as the topic enters your consideration—this holds true even if your business is not yet in the prime position for investment; initiating the process early allows you to strategically prepare and align your operations with investor expectations. 

Engaging with a specialist early on primes your business for investment while setting a solid foundation for sustainable growth and financial health.

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