Rising stars need look no further than the likes of snack company Graze for a demonstration of the merits of private equity backing. Following a 2013 majority stake buyout from the Carlyle Group, Graze successfully expanded into the US and broke the $100m annual turnover mark – half of which is generated from its new North American market.
However, while a VC-backed organisation can provide unrivalled autonomy, growth opportunities and remuneration, it is often high risk, high reward. Candidates must evaluate their personal motivations and strengths as well as examining the intentions of the investor to find the most beneficial career move.
What’s your motivation for seeking private equity backing?
There are numerous benefits associated with a company that has private equity backing, and for a certain type of individual, it is a fantastic world to be in. Often these rapidly growing companies offer greater decision making responsibility, less bureaucracy and the potential for an equity-based remuneration structure or long-term incentive plan (LTIP).
However, with these proposed benefits come expectations; for example, leaders will be expected to make significant decisions quickly, sometimes without the layers of support or compliance found in larger, more established organisations. Taking risks in this way, being bold and fully committing to the organisation is essential if your success is to be realised.
While an industry leading or equity-led remuneration package can be a head turner, it is unlikely to motivate even the most financially-focused individual to get out of bed in the morning if the wider working environment is at odds with their daily needs. Being honest about goals and assessing whether you are genuinely keen to work within the pace and sometimes ambiguity of an entrepreneurial setting or if you are more comfortable within a traditional reporting structure and the support it brings – must remain a priority.
Understand the objectives of the one giving you private equity backing
While Graze’s private equity backing smoothed the route to international expansion, private equity or VC investment can also prove invaluable in facilitating new product development, the creation of infrastructure networks or acceleration of capital expenditure – all of which could be essential for future business growth. During the interview process, ascertain what the objectives of the investor are.
Having sight of this early on will help you understand whether the expectations set upon you are realistic and if they are able to bring the right skills and proficiencies to the table. If possible, provide assurance that both party’s goals are aligned as well as providing a window into their attitude – how do they speak with others, do they respect the other and their capabilities?
Do your due diligence
Often, an analysis of the backers’ typical turnaround time – whether it be in the region of 18 months, three or five years, and the level of investment put into the business – should give a clue towards whether they are the best fit for the business.
Researching the expertise and experience of investors is also a useful exercise – the best partnerships are created when private equity or VC bodies are able to share both funds and industry know-how with the business itself – often through the appointment of knowledgeable non-executive directors and advisers who can help to drive the firm forward on a strategic level. Understanding what both sides can bring to a working partnership is key to selecting which businesses have the greatest growth potential for you.
In today’s FMCG marketplace, private equity-backed businesses can prove an extremely attractive outlet for entrepreneurial individuals. However, these businesses, while potentially rewarding, do require a certain set of skills and capabilities.
Alka Gandhi is a principal consultant in Berwick Partners’ consumer and FMGC practice.