Should Your Business Seek Private Equity Investors?

𝐒𝐡𝐨𝐮𝐥𝐝 𝐌𝐲 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐒𝐞𝐞𝐤 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐄𝐪𝐮𝐢𝐭𝐲 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬?

Private equity investment is a compelling choice to raise capital. However, choosing private equity requires an assessment of the business's current position, its growth objectives, and the alignment of interests with investors. Owing to our unique expertise in working with private equities and Egyptian clients, 𝐈𝐧𝐚𝐫𝐢 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 is well poised to provide insight into the topic. Let's delve into it:

𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐄𝐪𝐮𝐢𝐭𝐲: 𝐂𝐚𝐭𝐚𝐥𝐲𝐬𝐭 𝐟𝐨𝐫 𝐆𝐫𝐨𝐰𝐭𝐡

Private equity makes more sense when:

1. 𝑺𝒄𝒂𝒍𝒂𝒃𝒊𝒍𝒊𝒕𝒚 𝒊𝒔 𝒕𝒉𝒆 𝑮𝒐𝒂𝒍: Private equity provides an injection of capital that can fuel rapid expansion, which is ideal for businesses with a proven track record and a scalable model.

2. 𝑬𝒙𝒑𝒆𝒓𝒕𝒊𝒔𝒆 𝒂𝒏𝒅 𝑮𝒖𝒊𝒅𝒂𝒏𝒄𝒆 𝒂𝒓𝒆 𝑵𝒆𝒆𝒅𝒆𝒅: Private equity firms bring valuable industry expertise and management guidance, as well as access to networks to expand the business. This provides a guide for businesses to deal with complex decisions.

3. 𝑬𝒙𝒊𝒕 𝑺𝒕𝒓𝒂𝒕𝒆𝒈𝒚 𝒊𝒔 𝒐𝒏 𝒕𝒉𝒆 𝑯𝒐𝒓𝒊𝒛𝒐𝒏: Private equity offers an attractive exit strategy for founders or early investors seeking liquidity, allowing them to cash-out while maintaining business growth.

𝐏𝐨𝐭𝐞𝐧𝐭𝐢𝐚𝐥 𝐏𝐢𝐭𝐟𝐚𝐥𝐥𝐬 𝐨𝐟 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐄𝐪𝐮𝐢𝐭𝐲:

Private Equity is not the right fit when:

1. 𝑳𝒐𝒔𝒔 𝒐𝒇 𝑪𝒐𝒏𝒕𝒓𝒐𝒍 𝒊𝒔 𝑼𝒏𝒂𝒄𝒄𝒆𝒑𝒕𝒂𝒃𝒍𝒆: Accepting private equity investment may mean relinquishing some control over the business. This is a problem if maintaining control is important for the founders.

2. 𝑺𝒉𝒐𝒓𝒕-𝑻𝒆𝒓𝒎 𝑭𝒐𝒄𝒖𝒔 𝑪𝒐𝒏𝒇𝒍𝒊𝒄𝒕𝒔 𝒘𝒊𝒕𝒉 𝑺𝒕𝒓𝒂𝒕𝒆𝒈𝒚: Private equity investors may exert pressure for short-term profitability, which can conflict with long-term strategic goals, hindering sustainable growth.

3. 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕𝒔 𝒂𝒓𝒆 𝑴𝒊𝒔𝒂𝒍𝒊𝒈𝒏𝒆𝒅: Conflicts of interest can arise if the goals and objectives of the private equity firm don't align with the business's mission.

𝐀 𝐑𝐞𝐚𝐥 𝐂𝐚𝐬𝐞 𝐒𝐭𝐮𝐝𝐲 𝐟𝐫𝐨𝐦 𝐄𝐠𝐲𝐩𝐭:

Company X relinquished the majority position to a private equity investor. The strategy moving forward was not clear, and one of the founders found the private equity to be a limiting factor in the company’s continued growth, objecting to decisions involving capital expenditures for new product lines. This founder eventually decided to exit. Company X attempted twice to IPO as an exit strategy, and both attempts failed.

This quick guide should help you decide if private equity is right for your business.

𝐈𝐟 𝐲𝐨𝐮 𝐰𝐚𝐧𝐭 𝐭𝐨 𝐟𝐢𝐧𝐝 𝐨𝐮𝐭 𝐢𝐟 𝐢𝐭’𝐬 𝐭𝐡𝐞 𝐫𝐢𝐠𝐡𝐭 𝐭𝐢𝐦𝐞 𝐟𝐨𝐫 𝐲𝐨𝐮𝐫 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐭𝐨 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫 𝐩𝐫𝐢𝐯𝐚𝐭𝐞 𝐞𝐪𝐮𝐢𝐭𝐲 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭, 𝐫𝐞𝐚𝐜𝐡 𝐨𝐮𝐭 𝐭𝐨 𝐮𝐬 𝐚𝐭 𝐈𝐧𝐚𝐫𝐢 𝐂𝐚𝐩𝐢𝐭𝐚𝐥, 𝐚𝐧𝐝 𝐰𝐞 𝐰𝐨𝐮𝐥𝐝 𝐛𝐞 𝐦𝐨𝐫𝐞 𝐭𝐡𝐚𝐧 𝐡𝐚𝐩𝐩𝐲 𝐭𝐨 𝐚𝐬𝐬𝐞𝐬𝐬 𝐲𝐨𝐮𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧.