PRIVATE EQUITY | REALISE 9
8
PRIVATE EQUITY | REALISE
IDENTIFYING THE RIGHT BUYER COMMUNITY
An early assessment of the potential buyer universe helps management teams and the Private Equity investor determine the exit options and the investment thesis that will drive the greatest competitive tension.
INFORMATION REQUIREMENTS The depth of information requirements typically varies depending on the type of exit transaction planned.
WHAT ISA POTENTIAL BUYER LOOKING FOR?
Growth in market share Access to new products or markets Access to IP, technology or talent Forward looking revenue visibility Operational potential Profit resilience.
LOW
HIGH
Broadly speaking, buyers come from two main communities: strategic (trade) or financial (investors). Strategic buyers are often competitors, suppliers, or customers who are looking to gain market share or access to new markets. Financial buyers, such as another Private Equity house who will fund a secondary buyout, are more focused on realising a return on investment. As such, the way that businesses are evaluated, valued and marketed needs to be aligned to their respective motivations. Alternatively the company’s shares could be sold, either a full or partial divestment, to the public markets through an Initial Public Offering (IPO). Listing of shares is subject to strict regulatory requirements and restrictions which need to be planned and documented throughout the Private Equity lifecycle.
Factors that should be considered when identifying potential buyers include: X Is there a ready made group of strategic buyers looking for opportunities? X Is there another equity story that can be defined? X What are management’s intentions? X What is the envisaged debt capacity of the business? X Would the capital market value the business or fuel the growth more efficiently?
Sale to Private Equity
Sale to trade
THE RIGHT INFORMATION FOR THE RIGHT OUTCOME By identifying and planning a clear exit strategy, businesses can demonstrate a strong track record in accurately reporting the necessary information and supporting the areas with perceived growth potential. A “dual track” represents where businesses conduct an auction or other sale process concurrently with filing for an IPO. An IPO would typically require fuller financial reporting procedures but in some instances require less granular commentary around trading drivers.
Listing (IPO)
Refinance
Dual track (a combination)
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