
In Britain, private equity has not been as closely associated with the funding of SMEs as it has in other countries. For instance, private equity and venture capital invested ?26bn in US SMEs in 2013 versus only ?5bn in Europe. In emerging markets this is also the case ? countries such as Morocco and Egypt have increased funding to SMEs through private equity.
Private equity firms argue that they bring expertise and avoid the need for SMEs to pile up excessive debt. Specialists such as Growth Capital Partners declare the firm can get deals done quickly, and that it’s focussed on people. One of the fears that many SME owners in the UK have about private equity is that it can only be used as a source of finance if the business owner is prepared to give up control, either by completely exiting their business, or by selling a majority stake. However, private equity investors are increasingly keen to challenge that perception. ?Minority investing provides an alternative way, in which, as the name suggests, a private equity investor buys a minority stake, often leaving the owner free to run the business,? commented Charlie Johnstone, partner at ECI Partners ? which has worked with Caf? Rouge, Chubb, Racal Acoustics, Bloomsbury Publishing and Laterooms, among others. So why might seeking a minority investment from a private equity partner be the right choice for a business owner? ?Simply put, minority investments provide a more customised approach to finance that can be tailored to suit the nature, stage and management of the business,? said Johnstone. Importantly, it can allow business owners and entrepreneurs to retain a degree of control over their company and share in the future growth in value in their business even if they want to step away from day to day running of the business. In some cases, added Johnstone, businesses want to give a private equity investor a share in the company for the purposes of risk management. ?For many business owners their entire wealth is tied up in the business they have founded,? Johnstone explained. ?ECI has enabled many founders to take some cash off the table by selling a minority stake, allowing them to continue to run the business and have additional capital and resources to help expand the business, for example through the acquisition of another company or by opening new offices or factories. Read more about private equity:- Family office interest in private equity funds grows
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