Are you a candidate for private equity investment?

Warren Buffet famously states in Berkshire’s annual report that all he needs is five minutes before giving a yes or no on whether he’s interested in pursuing a transaction.  Not to discredit Mr. Buffet(whose patience and track record are another story), but his quick judgment is also shared by many private equity pros. 

Most firms plainly state in simple terms the types of businesses that interest them, and it doesn’t take much effort and analysis (or discussion) to determine if there’s a match. 

So does your business fit the general private equity acquisition profile for new platform investments?  Based on general observations perusing firm websites, and setting aside size, sector, and valuation considerations, I will share eight commonly business characteristics many private equity firms prefer.  Check back over the next eight weeks to see all of them.  The first one:

 1. “Strong management” 

Not sure why firms typically specify “strong” when it comes to management.  After all, who wants (or would admit they want) “incompetent” business leadership?  Bottom-line,  most private equity firms prefer management to come with the business.  They want passionate, motivated "thought leaders" who can deliver on what they promise.  Private equity invests in people and their ideas, not bricks and mortar.

Comments

[Mark R. Hahn]

Tim, excellent point, and driven home just last week in a meeting I had with a private equity firm in New York that is considering investments in the printing industry. The fund’s number one consideration before they make any investment is that the prospective acquisition target has committed talented leadership in place. Alternatively, the fund will also support an executive with strong industry experience who has an absolute commitment to his/her vision for the company and the target industry. Either way, supporting existing management to expand a business, or building a portfolio platform and subsequent add-ons along with a passionate, knowledgeable and visionary executive, it’s all about the leadership at the operating level for private equity investors.
Best - Mark