Private equity’s role in helping companies grow is often misunderstood, with a recent British Chambers of Commerce survey revealing that 41% of respondents were unfamiliar with private equity. Here Andy Lyndon, Director at LDC Birmingham, dispels some of the most common myths surrounding private equity.
Private equity is only for large businesses
For any management team targeting growth, whether it be through acquisitions or expanding into new markets, external equity funding can offer the capital needed to make that next step. We provide equity from £5m up to £100m to suit the needs of business of all sizes, and have pledged to invest £1.2bn over the next three years to give mid-sized businesses access to the capital and expertise they need to achieve scale.
Private equity will take control of my business
A common misconception is that once investment has been secured business owners will hand over the reins of the company, but this isn’t the case. We back management teams for their expertise and market knowledge, and work alongside them. Whether we take a minority or majority equity stake, the management team is always best placed to lead the business.
Private equity is all about the money
Entering into a private equity partnership offers more than just a capital injection. The market is home to a wealth of talent with experienced professionals from industry itself, as well accountancy, corporate finance and management consultancy, who can provide valuable strategic guidance and operational support.
A collaborative private equity partner will help support a buy-and-build strategy or drive impressive organic growth, and often has an experienced network of non-executive directors that can be introduced to the business to provide an extra layer of insight and direction.
Private equity has different interests to our own
From our experience, private equity works best when the partnership between investor and management is built on trust, a common vision and strong alignment of interests from day one.
Our partnership with the NEC Group is a great example of this. We completed the acquisition of the business in April 2015 in a deal that valued the company at around £307m. A year on from investment, the business’ turnover is up 17% year on year, it has launched its new NEC Live Productions venture and is expanding its international footprint.
This can only happen when there is a close working relationship between with the management team. We work with our portfolio to develop a 100-day plan, with processes that will have a visible impact on the business’ performance from the day of completion and build a foundation for continuous growth.
Private equity is transformative
This isn’t a myth. Private equity is a collaborative partnership between the management team and the investor to drive long-term growth and success. We have completed more than 500 investments over our 35-year history, and continue to look for ambitious, forward-thinking businesses across the Midlands to back and help accelerate growth.