Expert View ATTRACTING PRIVATE


EQUITY INVESTMENT by Jenny Burke


Corporate partner Forbes


A private equity (PE) investment fund is a collective of investors who purchase companies in the expectation those companies will go on to make higher returns.


PE funds have a reputation for securing higher returns by playing active roles in managing the businesses they purchase, using their expertise to implement change and stimulate growth.


They usually stay in place for three to five years before looking to exit. They see businesses through rapid growth and usually sell their shares in the business at the end of the process.


Like any business deal, private investment is secured through a mixture of research and meetings, initiated by either party. However, there are things you can do to make your business more attractive:


Compliance


Make sure the necessary compliance for your business is being followed and your records are up to date. This includes Companies House filings, annual accounts, statutory books, records of ownership of property and assets, and sector specific compliance. You should ensure your records are neat and easy to follow. Private


And in June 2021 it announced the closing of a funding round led by global venture capital and private equity firm Insight Partners. ETF and serial investor Simon Murphy also participated in the round.


Jeff Lieberman, managing director at Insight Partners, said at the time: “Consumers are reassessing their consumption, and they expect the businesses they buy from to help them on that journey.


“The Modern Milkman combines a focus on great customer experience with a business model that is suited to significant expansion to meet the needs of customers across the UK and beyond, and we are delighted to be supporting the company on the next stage of its growth.”


It was reported that the funding would be used to increase research and development, as well as supporting the business’ continued growth in the UK. It was also being used to expand The Modern Milkman team, enabling it to develop innovative ways to package fresh groceries in return and reuse packaging.


The latest Praetura Ventures deal was announced in July this year. It takes the total number of businesses in the Manchester based venture capital firm’s portfolio to 28, with Modern Milkman joining several other successful tech companies.


equity funds will be more willing to invest in a business which is transparent.


Strengthen your team


Private equity funds bring with them their expertise in growing businesses, but they require responsive and supportive personnel on the ground to execute their plans when it comes to the day to day running of the businesses. You should take care to appoint personnel in positions of authority who share the business’ vision for growth.


Diversify your customer base


Private equity funds want some piece of mind when it comes to how secure the businesses income stream is as they need a stable starting point. You can ensure this by making sure the business has a wide range of clientele and is not dependent on just one or two major customers.


Secure your customer base


The more secure your customer base, the more likely a private equity fund will be attracted to your business because it provides a stronger foundation for the fund to build on. You can plan for this in advance by ensuring you tie customers into larger term commitments where possible, such as two year-plus contracts.


Praetura invests in early-stage, high-growth businesses across the UK, with a particular focus on supporting entrepreneurs across the North of England.


We’re excited by the opportunity to collaborate and learn


It recently announced £125m in funding raised since launching its maiden EIS fund, The Praetura EIS Growth Fund, in 2019.


David Foreman, managing director of Praetura, says: “We are far from alone in our admiration of Modern Milkman, which has grown at a highly impressive pace and is now eyeing global expansion.


“As well as the company’s unique and innovative approach to the grocery sector, what attracted us are its highly authentic sustainability pledges and plans to significantly curb plastic use.


“The business and its founder Simon represent a new generation of Northern businesses, that are transcending sectors and putting the region at the forefront of UK innovation.”


LANCASHIREBUSINESSVIEW.CO.UK


Steve Bell Corporate finance director


@pcaltd pierce-c.-a.-limited @PierceCA


DUE DILIGENCE PROVIDES CLARITY


FOR ALL PARTIES The due diligence process can include a review of the financial, legal and commercial aspects of a transaction. It can be lengthy and is generally conducted on behalf of a buyer.


The financial due diligence report is an investigative analysis of the businesses’ financial performance. The report will focus on the robustness of the financial performance, identifying areas of sensitivity, ensuring the funding structure is suitable for the transaction. The report can also include an assessment of the synergies that would expect to accrue in a transaction.


The legal due diligence is an assessment of the detailed legal landscape within which the target operates and the report will help the buyer understand the potential legal liabilities surrounding a business.


A commercial review will focus on identifying the company’s position in the market, growth opportunities and how it differentiates itself from its competition.


Due diligence is an essential element of the acquisition of a company and any seller needs to plan carefully to ensure that all information is presented in a clear and concise manner to reduce the possibility of challenge that could fundamentally affect a deal or in the worst case kill it stone dead.


Clear, unambiguous advice on the financial aspects of a transaction, advising buyers, sellers and funders, adds real value to the transaction process.


Pierce Corporate Finance has experience of assisting sellers to complete their own ‘Seller Due Diligence’ to highlight these areas of concern before engaging with buyers so that key information can be presented at the start of the process.


For more information please visit www.pierce.co.uk


or call 01254 688100


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