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How to find the right private equity partner to drive your growth journey
by Chelsie Harris
8 September 2022
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Growth is on the menu for private and family businesses
Australian private and family businesses are in the midst of a once-in-a-generation event. Over the next 20 years, a significant amount of responsibility and an estimated $4 trillion of wealth will change hands as owners retire, sell up, or pass the reins onto the next generation.
PwC’s recent Global Private surveys1 found that 65% of the future leaders of private and family businesses say that growth is a top priority and 91% of Australian family business owners expect to see continued growth in 20222. The big question they will be facing is how to fund that growth without taking on too much risk.
Australia’s private businesses should view Private Equity as a valuable tool to facilitate growth
We appreciate that as a family business owner, the mental load never stops. The business is carried home with you when you ‘leave work’ and pressure from customers, employees and stakeholders is ever present.
Private Equity partners could offer an avenue to share that load; giving owners the ability to de-risk their business by taking some of their own money off the table and replacing it with growth capital, creating a value-add partnership and enabling the mental headspace to zoom out and approach growth strategy with a fresh perspective.
PE offers many benefits stretching beyond just financial investment:
- Strategic guidance and management support
- Access to unique investment and growth opportunities
- Flexibility around structure of debt and terms of equity agreement
- A partner with an aligned path to ultimate exit
Private Equity is an increasingly desirable investor class
PwC’s Global M&A Industry Trends 2022 Mid Year Update3 found that Private Equity’s share of M&A has increased from approximately one-third of total deal value five years ago to almost half today. It is estimated that Australian PE funds currently have around $26bn of ‘dry powder’ primed to be invested in Australia’s private and family businesses.
Lower-than-optimal M&A activity amongst private businesses is likely to be due, in part, to preconceptions about how growth should be funded. However, businesses prepared to look beyond their cash flow for growth opportunities can typically access more money.
The perception of PE investors might be that they are aggressive, looking to radically cut costs and change management as they are investing impatient capital. However these perceptions are often inaccurate and not all PE firms are the same.
Moreover, PE can be a particularly good match for family business owners because families are not necessarily required to give up the management of the business—or 100% of the profit pie.
In fact, a PE partnership can empower family business owners to really focus on what it is that drove them to go into business in the first place. PwC’s Owner’s Agenda framework can be of assistance here too; it is designed to help you develop both your ownership and business strategies in a consistent and integrated way, reflecting that you—and your passion—sit at the heart of them.
Choosing the right private equity partner for your business
Finding the right business partner can be as important as finding the right partner in life. PE funds all have different personalities and cultural fit is critical.
In finding your perfect PE partner, you should look for:
- Alignment of culture and values
- Complimentary skills, paying particular attention to where you can expand your skillset by bringing on board capabilities that don’t exist within the current ownership profile
- Incremental networks and connections, which are especially valuable in new markets
- Flexibility around fund objectives and investment time frames
- Clear and upfront communication on growth ambitions and strategy.
Grow by all means, but make it sustainable. Working with the right PE partner can help accelerate your plans, find the right growth opportunities and ultimately strengthen your business.
1 PwC Global NextGen Survey 2022
2 PwC Global Family Business Survey 2021
3 PwC Global M&A Industry Trends: 2022 Mid-Year Update
©2022 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australian member firm and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only and should not be used as a substitute for consultation with professional advisors. Liability limited by a scheme approved under Professional Standards Legislation.
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Contact us
Chelsie Harris
PwC | Private | National Leader - Deals, PwC Australia
Tel: +61 3 8603 1231
Jeremy Bransgrove
PwC | Private | Partner - Deals, Melbourne, PwC Australia
Tel: +61 438 232 459