Almost ￡40 billion deal value in 2019… but what is Private Equity?

Last week we launched our second Mid-market Private Equity (‘PE’) report an analysis of the deals done in the UK in 2019 and our views on what’s in store in 2020 (link at the foot of this article). The report focuses on sector appetite, deal types, debt structures, exits and multiples… all interesting stuff if you’re familiar with PE.

What about those new to PE, private company shareholders and management teams looking at PE for the first time? What is it and how can it be useful to you?

In 2019 we ran a seminar aimed at Demystifying Private Equity, covering:

1. Why private equity exists and why there’s more money than ever available for the right businesses?
2. How do the different investors differ from each other?
3. How do private equity deliver returns for investors?
4. How private equity houses evaluate businesses and the key characteristics of businesses that PE are looking to invest in?
5. Why PE investment can be helpful to shareholders and management teams as part of business growth or succession?
6. How deals are typically structured?
7. How much money could be available to shareholders on a primary PE deal?
8. What level of involvement will investors have and who is in control of the future of the business?

All questions we spend a lot of time on with clients to help them understand the options and definitely too much to dive into in less than 500 words but as a quick summary here are a few examples of when you should consider PE investment for your business. In no particular order;

• You’re growing and to capitalise on the opportunities that are available to your business you need growth capital to invest in facilities or people;
• You’re confident in the business but all of your family or personal wealth is tied up and you could make clearer decisions if you could take some cash out and de-risk; and
• You’re approaching retirement, without family succession in the business and a lack of clarity on whether there is a trade buyer for you.

Private equity come in all shapes and sizes and with varying investment criteria to set them apart from each other. You’ll certainly be more attractive to a wide audience of investors if you have a robust underlying business, an attractive market with tangible growth opportunities and a strong management team but you don’t need all of those things to be of interest. A quote from a recent catch up with a relatively new private equity investor entering the market with their first fund was “we’re looking for the deals that are a bit difficult!” – So if that’s you and you hadn’t considered PE before maybe the time is now…

Always happy to help business owners and management teams understand their options when it comes to investments or potential sales – if that’s you… please get in touch.

______________________________________________________________________

Find out our M&A predictions for 2020 in our recent report on the mid-market Private Equity activity in 2019. Read the full report: https://home.kpmg/uk/en/home/insights/2020/02/uk-mid-market-private-equity-deal-analysis-2019.html