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Looking for private equity investment? Here’s how to get your house in order

3 min read

13 November 2018

Access to finance has always been notoriously difficult for growing businesses. If you’re like one of many UK SMEs drawn to the lure of private equity investment, there are a few things you need to do to be eligible. Rutland Partners managing partner Andy Powell explains.

The UK is dominating the private equity (PE) landscape. While deal value is falling across EMEA – capital deployed by PE companies dropped from €23.4 billion in July-August 2017, to €17.4 billion in the same period this year – the UK is gaining more than any other EU nation, taking 67% of capital investment.

But with the country’s GDP falling, bank rates rising and any certainty around Brexit yet to materialise, how will UK SMEs ensure finance will still come their way?

The challenge now, for PE-seeking firms, is to remain an attractive proposition and maintain a strong relationship with investors once a deal has been struck.

For over two years, SME decision makers have been taking note of the possible changes a Brexit deal could inflict on the business world. Rutland Partners is a PE firm investing in businesses that need to change or adapt.

Sharing his insight in the PE approval process, Andy Powell, managing partner at Rutland Partners, explained the specific characteristics Rutland Partners looks for in an SME.

(1) Scope for growth

The first port of call, he says, is to assess the scale of the business. Before approaching such a firm, business leaders are advised to think first: “Is there scope for growth?”

The resilience of the market is also taken into account, as is the complexity of the change the company wants to make.

(2) Clearly defined goals

While the assessment of these areas would require thorough research and good timing, the top factor of the proverbial deal assessment pyramid is “controllable actions”.

These are the plans the management team have set out, demonstrating their business savvy and future goals.

Investors and PE companies will be extra vigilant to see whether a clearly defined and manageable plan to achieve these goals has been formed.

(3) Positive relationships

Once you’ve succeeded in gaining interest, the job of retaining that new knowledge input begins.

“Upon approval, the relationship between PE firm and company are vital,” explained Mark Andrews, CEO of Armitage – one of the companies under Rutland’s wing.

“The underpinning reason for working closely with them,” he said, “is to find out what they expect and need in turn.”

This is a must with any PE company, he acknowledges. They’re the experts, so it’s worth listening when they tell you what needs to be done. It’s a win-win situation.

This personal element will be the key to retaining investors post-Brexit.

While it remains to be seen whether the UK will stay as strong as it is currently, it’s always worth knowing how to go about gaining finance. And how to keep investors happy.