What should a business owner expect after being acquired by a private equity firm?
That’s a good question. A business owner, upon entering into a relationship with a private equity group, is going to experience a range of things because they are really entering into a new business relationship that can only best be described as a marriage. You are going into business with somebody where both parties have generally equal influence about things and you’ve got to work together to accomplish a common vision.
The first year of the relationship is really going to be spent getting to know each other. There is going to be a lot of time spent with the private equity group learning about the business, spending time there at the company, maybe traveling to trade shows together, having meetings where you talk about the vision of the business and where you want to go with it, and working with different consultants or experts to explore ideas that you have developed together. The first year will be a learning experience figuring out how you are going to work together and developing a natural rhythm to that relationship.
Years two, three, four, and even five are sometimes spent executing that plan. Depending on how many projects you have going on, how fast the business is growing and what kind of plan it is, the entrepreneur and business owner could be meeting with or spending time with someone from the private equity group once a month and talking by phone even more frequently.
Alternatively, if your business is growing well and you've got a full team growing organically and executing the plan, you may only interact with the private equity partner at board of directors meetings, which happen quarterly or every four to six months, depending on the philosophy of the private equity group. What to expect after those first five years really depends on what the overall plan is. However, the first year is generally similar among both private equity groups and various industries in that a lot of time will be spent getting to know each other, learning the business and putting the plan together.
More Q&As from our experts
- What are typical fee structures for portfolio companies by private equity groups?
- Which attributes do private equity groups find attractive in a business?
- What are some of the key differences between a financial buyer and strategic buyer?
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