Private equity, or venture capital, is an investment made on the strength of rigorous analysis with clear intention and purpose. Private equity investment firms provide capital to small businesses and startups that show potential, or larger established companies that are underperforming at present and need to be “fixed up.” With the financial resources and business expertise the investors provide, the businesses they invest in can be built up or turned around to the point that they can then be sold for a profitable return. Good management is vital.
Private equity investors can appoint management teams in several different ways – the most common being management buyout (existing management teams kept under new ownership), management buy-in (new management brought in from outside) and BIMBO (a mixture of MBO and MBI). A high profile MBO was Birds Eye. When Permira bought the company from Unilever, Craig Hamilton was catapulted to CEO when he was promoted from within, achieving large-scale success. Whether you are part of the existing management team or approached by investors to take over their newly acquired company, you must be on board with the goals of the investors and know how to use capital wisely.
Advantages of managing a private equity company should not be overlooked either on a personal or professional level. Large incentives are often provided to managers in order to ensure that their goals align with those of the investors, and that management works unfailingly to deliver on target. Management is generally able to benefit from a close working relationship with the investors, who will be directly involved in the running of the company. This direct involvement with a limited board typically leads to the ability to make quick decisions regarding use of capital and product or policy changes. PE investors tend to have a broad focus and a long-term plan, meaning that a manager can feel less pressure to simply hit figure targets each quarter and start to look at making far-reaching decisions.
A manager for a private equity company is in charge of implementing large-scale change programmes. Charisma and energy are essential in getting people on board. It is important to see the bigger picture and focus actions towards overarching long-term goals, often set by others. It is necessary to have a good head for finance, and big decisions need to be made quickly. The best situation is to have a management team made up of a visionary CEO, expert financial director, a sales director with sales and marketing expertise, and an operations director with clear and practical knowledge of business processes.
Managing a private equity company is a huge undertaking, and expert advice is always going to be beneficial. A rich source of information can be found online. Head of Capital Management Mukesh Valabhji’s on Twitter – he regularly tweets articles that comprise expert knowledge on investment. Capital management provides private equity loans and business expertise training to startups and companies with potential, and Mukesh Valabhji has extensive experience managing the Seychelles Marketing Board.
There are myriad advantages to be gained from managing a private equity company. A manager will receive direct input and support from investors, but their expectations will be high in return. It is essential to access seasoned advice.