Know the PE Ecosystem
The PE landscape has changed a lot over the last ten to 15 years. A situation that meant some software companies, especially early-stage enterprises, were not necessarily of interest to PE firms.
Today, most technology companies, including those in the software space, that are post-series A funding round will be of interest to some PE firms – and in some cases companies even earlier in their life-span can find interested PE investors.
Some PE firms are generalists, whereas others have a specific regional focus. Some are sector specialists; others focus on turnaround or transformational acquisitions. Each PE is different and has different focus points and strengths. Other factors, such as risk-willingness and how closely involved they wish to in the running of their portfolio companies also vary substantially. Some PE firms prefer a hands-off approach, while others will want to be very hands-on. Both approaches have merit, and it is important for the leadership team of your company to look objectively at what kind of PE partner your company needs.
Their investment preferences also differ. Some prefer taking minority stakes in companies, including enterprises that are in pre-profit stages of growth, while others target more mature companies, sometimes looking to make multi-billion-dollar investments.
When considering PE investment, it is advisable to find at least three or four interested parties. This promotes healthy competition between the PE firms and thereby increases the chances of getting the deal you are hoping to achieve.
Company leadership should pay extra attention to identifying why you want to work with a specific PE firm. For example, if you are a software company, you may prefer to work with a PE firm focused on your industry. In some cases, it can be advantageous to collaborate with industry experts, but if, for example, your core ambition is to grow international sales and optimise internal business processes and optimise business processes, industry expertise becomes a somewhat less important quality to pursue.
Insight and understanding of the focus of specific PE firms help you identify which PE email inquiries to reply to or which PE firms you should contact. It may take much time to sift through the many options and identify potential buyers, as well as define your core needs, which makes working with consultancies a good option. Thanks to extensive networks and contacts, consultancies can help you identify the optimal PE firms to engage with, and often much quicker than you would necessarily be able to do on your own.