The PE firm is still likely to want the strategic input of the entrepreneur, as both parties should be looking to encourage growth and efficiency.
4. After five years the PE firm will exit, one way or another
Although the average PE lifecycle still seems to be five to seven years, a recent EY report showed that more PE firms are focusing on collaborations instead of full buy-outs, as well as longer-term investments with other investors on board. Many PE firms are holding on to investments for more than seven years these days.
It’s good practice to set strategy and goals on a three- to five-year timeline, whether you have PE investment or not. It gives direction to your company and allows an assessment to be made about what is needed to achieve your goals.
5. You will lose the company that you’ve built
This is always going to be a tricky one for some entrepreneurs: having spent years building something of which they are proud, do they really want to let it go? But I’ve also had lots of conversations with entrepreneurs who are already planning their next venture, or have plans for developing a new idea. Entrepreneurs rarely stay at the same company forever, and the experience of creating value and refining what has already been built will be very useful for the next time they join (or start) a company. There can be lessons to be learned from PE firms and those who work within them, so an entrepreneur may want to use these insights and relationships for their future endeavors as well.
Being optimistic in business is one of the strongest positions to take. There are undoubtedly some negative connotations about the role some PE firms have played in the past – but there are potential benefits to attracting investment that PE cannot be ignored.
Any entrepreneur who wishes to take their company to the next level may want to consider investment from PE firms and they should talk to a few different firms in order to appreciate how they operate. You should come away from the conversation with a clearer understanding of what both parties would want to achieve in an agreed timescale – and then decide how to continue your exciting growth journey.
Companies looking to finance their growth have a number of options. Private equity (PE) investment is a popular choice, but some private company owners are worried that it may mean losing control of their business. Randy Tavierne, EY Global Assurance Private Client Services Leader, examines this and other common misconceptions about PE investment.