Before seeking such alternative sources, however, private boards would be wise to assess if they are actually "direct capital ready." To do so, Steve Shultz, Global EY Private Tax Leader recommends they review the company's existing business structure, financial mechanisms, and planning/implementation processes.
"What distinguishes direct capital providers is they are generally investing their own capital rather than raising and redeploying capital from other investors,” Shultz says. “Many direct capital providers will consider strategic, patient capital investments in other businesses.”
He explains, "Often the direct capital is controlled by family offices, family strategic investors, business-owning families or a syndicate of strategic investors ready to invest in other businesses. These investors have the ability and desire to provide capital with a long-term horizon and a broad concept of value that can be very appealing for private businesses and purposeful owners."
To determine if your business is in a position to consider a direct capital investor, read Steve’s article What new capital options are on the rise as markets change.