Private Equity—devil or saviour?

Probably the biggest decision a family-owned business will make is whether to sell or to continue to build a legacy.

If the decision is to hold on and grow the business, the next key consideration will be how to fund the growth.

Consider this: Is it better to continue using your bank as the business’s sole capital provider, or is it more lucrative to look at an investment partner model?

If the agreed action is to sell the family business, there would be plenty of sensible reasons why this point has been reached.

It may be that there’s no next generation or they’re not interested in the business … or possibly a sense that it’s time.

There are many different ways a family business can either be sold or attract investor funding. One option is through a Private Equity fund (PE fund).

A common view held by many family business owners is that PEs are vultures – there to wreck your business, cut your staff entitlements and stomp all over your cherished values.

And while there may be some validity in this opinion, not all PE funds are the same. Usually, the ones you read about (which grab the media’s attention) are the big buyout funds.

However, there are a number of smaller growth partners which are a completely different story—and Growth Partners does seem a better name for these ones.

Family Business Central has experience working with PE funds, learning about what they do, how they do it and generally how they operate.

We recently surveyed a sample of family business owners who had gone through the process of selling to and working with a PE fund known to Family Business Central.

Words and phrases like, ‘mentor’, ‘coach’, ‘working together’, ‘learned a lot’, ‘discipline’, ‘great metrics’ and ‘advice’ were very common in our conversations.

We asked questions like:

“How did the PE fund deal with disagreements?”

The answers were unanimous that yes, disagreements did arise, but we thrashed them out and came up with good outcomes.

Each of the family business owners we surveyed was very happy financially, very happy with the process and was now looking to their next project.

Obviously, not every story is like this and not every PE fund is suited to every family business.

However, if you’re a family business thinking of selling, there are reputable PE funds that are well-qualified to provide appropriate value for your business.

Most PE funds will be selective … they don’t just work with anyone. But it’s a worthy consideration if you and your family are thinking about selling.

If you’re struggling with the ‘how’ to sell your family business, come and talk to us. We’ve got the expertise to carefully and sensitively guide you and your family through the process.