Will private equity replace the incumbent management team once they make an investment?

This is one of the biggest misconceptions in the world of M&A. When we’re speaking to potential private equity (PE) investors regarding an upcoming sale, the very first question they ask us is “Is there a strong management team?”. Mid-market PE houses seek to partner with high quality teams, who they can rely upon to deliver the business’ growth plan.

Whilst some PE firms employ operational team members, who have experience in operating businesses and are available to provide guidance, they are never keen to take over and run a company. In fact, it would be fair to say that the loss of a management team is one of the greatest concerns for an incoming investor.  This is why they commonly use ‘sweet equity’ as a tool to ensure the current management team has 'skin in the game’ and whose objectives are fully aligned with the investors’, to achieve the maximum growth potential. 

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It is one of the biggest misconceptions - PE houses seek to partner with high quality teams who they can rely upon to deliver the business' growth plan.

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Managing transitions when they do arise

Whilst it is not the intention of PE to rock the boat, they can be called on for help when plans do change and will usually accept a level of transition, particularly where it is planned.  For example, this could be if a key member of the team is reaching retirement age before the expected end of the next investment horizon, or where the original founder is stepping away and handing over control to a strong management team. 

As far as possible, any known transition plans need to be disclosed during the transaction and planned for in an appropriate timeframe. The golden rules are transparency and planning so that all-important trust and confidence are maintained in the relationship. 

Picking the right partner for you

The right M&A adviser is crucial in making sure that the PE investor you select to partner with aligns with your plans for the business. They will have deep knowledge of the various PE houses and approaches, and will be able to use their relationships and experience to navigate you through a private equity transaction.

Whatever your objectives, the right adviser can also help you to get the best possible legal and commercial terms built into your transaction, to make sure you have the right deal on the table and that all sides have peace of mind. 

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We don't hide behind jargon and complexity. Instead, we aim to open up the black box of M&A, illuminating the path with clear insight, simplifying the process, and delivering valuable information.