Dispelling The Private Equity Myths
2nd January 2020 Ed Lane, LDC
Despite its ability to drive growth, private equity is still relatively underused by the business community. Let's take a look at some of the reasons why this is the case.
Here Ed Lane, who works in investment origination for the UK’s leading midmarket private equity house, dispels some of the most common myths about private equity.
Private equity is only for large businesses
There is a perception that private equity is something for larger firms, but for any management team looking for growth, be it through acquisition, professionalising the business, expanding a service line or targeting new market opportunities, external equity funding can offer the much-needed capital to make that next step.
Private equity will take control of my business
Some business owners have concerns that they will be handing over the reins of their company once they secure investment. This isn’t the case - we invest in management teams and back their expertise, market knowledge and ambition. Whether we take a minority or majority equity stake, the business has to be led by its management team.
Private equity just supports buyouts
The funding needs of businesses have evolved and so has the private equity industry with it. While the traditional buyout is a staple, it is now common for private equity investors to provide development capital when backing high growth companies, to fuel a buy-and-build strategy or even to deliver the funds to support an equity release when business owners look to draw down their shareholding.
Private equity is all about the money
Private equity professionals offer a lot more than just cold, hard capital. The industry boasts a wealth of talent with experienced professionals from industry itself, as well accountancy, corporate finance and management consultancy, who can provide valuable strategic guidance and operational support.
Private equity is all about creating value by building larger, more efficient and, fundamentally, stronger businesses. To do this, investors must develop a comprehensive understanding of both the business and the dynamics of the market in which it operates.
This can only happen when there is a close working relationship between with the management team. We work with our portfolio to develop a 100-day plan, with processes that will have a visible impact on the business’ performance from the day of completion and build a foundation for continuous growth.
Private equity is only interested in London
Our regional offices have delivered some of our most exciting investment opportunities in recent years – in the North East, Team17 has become one of the UK’s leading videogames publishers, whilst in the Midlands we’ve supported UK holiday park operator Away Resorts almost triple its revenues as part of an ambitious acquisitive strategy.
Private equity is transformative
This isn’t a myth. Private equity is a collaborative partnership between the management team and the investor to drive long-term growth and success. We have pledged £1.2billion of capital over the next three years to provide management teams with the confidence to deliver their ambitious growth plans