Private Equity checklist

Private Equity Funds offer money and advice, in exchange for large stakes in mature businesses. This type of external finance is suitable for founders and early investors looking for an exit.

This checklist can help you navigate some of the common pitfalls of Private Equity, as well as understanding whether the process is achievable for your business – before you start.

Please note - This checklist is not part of an application process for Private Equity. However, we hope it gives you an idea of what is involved and what you need to do to prepare. Investors may ask for more or less information about your business and the finance you need than what is set out below. This will change depending on the Private Equity Fund involved.

Private equity is changing...

The investor base in Private Equity is steadily moving away from banks, insurance brokers and pensions funds. Now, High Net Worth Individuals, families (and family offices) and sovereign wealth funds are investing.

These more informal institutions tend to have more appetite for risk. This means that younger, riskier businesses may find Private Equity more accessible.

Stage 1: Understanding Private Equity

Do you understand what Private Equity finance involves?

Do you know how it’s different to Growth Capital or an Initial Public Offering (IPO)? Are you prepared to give up control of your company? Are you familiar with the legal process of a transaction?

Are you looking for wide-reaching change?

Private Equity funds often make changes in business structure, strategy and management.

Stage 2: Evaluating a Private Equity firm

Do you understand how much control you will have over your company?

Understand whether you will be removed from the day-to-day running of the company. Will you retain control of the strategy, talent or management team – or none of these? How many board seats are your investors expecting? Will they be appointing a Chairperson?

Are you comfortable with the price you’ve been given?

And how does it match up to the stake you’ve been asked to give in return?

Do your definitions of ‘value’ match up?

Do you have the same outlook towards finances? Do you have the same outlook towards customers and employees? What about reputation?

Have you done your due diligence on the investment firm?

Which businesses have they worked with before? Do they have case studies or public testimonials?

Do you have a non-disclosure (confidentiality) agreement in place with the fund?

If sensitive information is going to be shared, it’s worth preparing a document in advance. Non-Disclosure Agreements (NDAs) can be used to protect Intellectual Property (IP) and commercially sensitive data.

Do you understand what happens once the investment is over?

What are the firm’s plans for exit? Private equity Funds typically look to exit their investments within three to six years.