Corporate Finance » Private equity- enabling growth

As a business grows, it often reaches certain inflection points – critical moments when in order to move onto the next stage there is a requirement to invest, often in people, systems or physical capacity – examples include expanding the office or facility, bolstering the sales team, acquiring another business or expanding geographically.

Financial directors are frequently asked to assess whether these investments can be funded from cashflow or require external funding, such as bank finance. Beyond the financial aspects, time and expertise are also essential to ensure such developments are a success.

Another way to pursue these growth-enhancing steps is to bring on board an equity partner capable of bringing both enhanced funding and the expertise required to progress your plans. The right private equity firm can provide both these things.

The right partner

Private equity firms will assess the partnerships they enter into very carefully. Likewise, management teams should thoroughly and thoughtfully assess the private equity partner they are considering teaming up with.

No two private equity firms are the same; all have different approaches, strategies and areas of expertise. You will want to ensure you find a partner with a proven track record in the areas relevant to support your specific goals.

However, above all else, the reputation they have in good times and bad that is important to know. In these uncertain times, a backer with experience in downturns and a culture of support in more difficult markets is vital.

How have we helped?

Geographic expansion in the UK or further afield is an area where some private equity houses can offer help.

Our approach is to build a local presence in some of the faster-growing markets, which can facilitate warm introductions and local knowledge. CloserStill Media, an exhibitions business, expanded through geo-cloning its exhibitions in emerging markets, as well as making eight acquisitions during a successful partnership with Inflexion. The business attributes much of the success of its Hong Kong business – as well as the largest order in the history of its Asian business – to working with Inflexion’s in-country expert there.

Similarly,  specialist animal health information and data provider Kynetec carved itself out of Frankfurt-listed parent GfK in 2016 with our help, and subsequently utilised our local Brazil expert to help set up there. The company was able to conduct business almost immediately, as the Inflexion contact utilised his 20+ years’ experience of working in South America to work quickly through the necessary administrative and legal processes.

Growing through acquisition can help transform a business if done effectively – meaning the right targets are identified, respectfully approached and then tactfully negotiated with. The right backer ought to be able to assist with these aspects – as well as the integration post-deal – in addition to securing favourable terms with lenders if a debt package is necessary. Builders merchants Huws Gray knows the benefits of M&A well: the Anglesey-based builders’ merchants had been growing organically and acquisitively for decades. Last year, the firm took minority funding from Inflexion to help it to grow faster but whilst retaining control of the business. Later that same year the firm acquired Ridgeons in the South and just about doubled its business overnight.

Another key lever of growth is digital enhancement. An effective digital strategy can increase customer engagement and loyalty as well as improve customer service, which in turn drives sales. Our digital team assess each new investment’s digital capability and then work with the deal lead and management to enhance this during the partnership. Progress is assessed regularly with the benefit of wider knowledge-sharing and learnings gleaned from each new investment. By way of example, we have supported Virgin Experience Days to upgrade its digital offering, and this is delivering real returns to the business: lower cost of customer acquisition, higher conversion rates and greater levels of repeat purchase.

The best partnerships help strengthen businesses in the medium-term but also prepare it for the next leg of its journey: be that a new strategic corporate partner, another financial backer or an IPO.

We feel privileged to have partnered with nearly 70 companies in pursuit of growth over our history, and we are delighted that many of the individuals involved return to work with us again in another capacity.