Could equity investment help you to grow your business faster?
By Stephen Stolliday
If you’d like to grow your business faster and maximise its
long-term value, a loan or debt investment might not necessarily be
the best funding choice to help you achieve your goal.
Business owners and management teams often think that loans and
debt investments are their only option and don’t consider the
potential advantages of an equity investment.
Over the last decade equity investment or private equity has
become far more widely accepted as an alternative funding source
for management teams looking to grow their businesses more
While it isn’t right for all businesses, where a business
has an experienced and well-balanced management team, a clear
business plan focussed on growth coupled with strong products and
services, equity investment could be the right funding option and
the route to faster growth.
In fact, recent BVCA (British & Venture Capital Association)
research has shown that equity-backed businesses grow at a faster
rate than those funded by traditional sources, such as loans and
This combination of major funding, expertise and incentives can
be very powerful. A study by The Boston Consulting Group found that
more than two-thirds of private equity deals resulted in the
company’s annual profits growing by at least 20%, and nearly half
the deals generated profit growth of 50% a year or more.
‘More than Capital’
At Finance Wales we often describe equity investment as offering
‘more than Capital’ because of the expertise and experience equity
investment professionals can bring on a local level. Once
invested, they’ll take an interest in your business, identifying
the key issues you’ll need to focus on to develop the business and
increase its value.
Is equity investment right for my
Here are some of the key advantages equity investment can
- Potentially faster growth
In addition to their investment, equity investors can bring a
wealth of new insights on all aspects of your business, helping you
to make sure it’s best placed for growth. They can help you
to structure your Board more effectively, improve your internal
systems and processes, especially in terms of reporting, governance
and fiscal discipline.
- Value creation
An equity investor can
help you to understand which strategies you’ll need to put in place
to maximise your business’ long-term value and ensure it reaches
its full potential.
Moving into new markets or internationalisation are often good ways
to develop your business and increase its value, for instance, and
your investor will have the experience and expertise to help you to
make the right strategic decisions.
- Support for your objectives and growth
As your backer, your investor will share your growth objectives and
support you in the next stage of your company’s growth journey,
whether it’s financing an acquisition, securing growth capital,
allowing for an equity release or a planned exit where succession
is an issue.
- New opportunities
Your business is likely
to be one of a number in your investor’s portfolio and this can
open up a wealth of business development opportunities including
trade opportunities in new markets.
- Enhanced credibility
Having an equity investor backing your business can enhance its
credibility and raise its market profile, making it more attractive
to other investors when you want to raise additional investment as
well as to potential acquirers. It could also help convince
customers and suppliers to trade with you.
One final point to consider
By securing equity investment you will be welcoming experienced
investment professionals into your business who will help to shape
your company’s future. As a management team you will need to have
an open mind about the new ideas and suggestions they will bring if
you are to take full advantage of their partnership.
To find out more about how Finance Wales can support your
business through equity contact us.