Private Equity: Key Considerations for Businesses Preparing for Strategic Growth
Private equity (PE) has become a vital funding source and strategic support for businesses across sectors such as technology, healthcare, and consumer goods. While PE can accelerate growth, Gerard Hughes, Partner at Baker Tilly Ireland, emphasises that businesses must be prepared financially, strategically, and culturally before engaging with PE investors.
“Private equity can offer transformative growth opportunities,” says Gerard. “But it’s not just about securing investment—it’s about understanding what that investment means for your business, decision-making processes, and long-term goals.”
"Private equity can offer transformative growth opportunities, but it’s not just about securing investment—it’s about understanding what that investment means for your business, decision-making processes, and long-term goals."
Evaluating Private Equity: Is It the Right Fit for Your Business?
One of the first questions business owners must ask themselves is whether private equity is truly what they want. “Once you bring in PE, decision-making will likely shift,” Gerard explains. “Owners who are used to running things independently may find that private equity partners bring new approaches, structures, and priorities. Before proceeding, it’s important to be clear on whether you’re comfortable with that external input level.
Another issue for businesses to think about carefully is what the news of PE investment will mean for your clients or customers.” Gerard continued, “Private equity investments typically come with a defined timeframe, meaning another transaction—such as a sale or exit—will occur within an agreed period. It’s crucial that this process doesn’t destabilise your overall portfolio during that time.”
Key Considerations for Businesses Preparing for Private Equity Investment
To ensure businesses are ready for private equity, Gerard outlines several critical areas that demand attention:
Private equity investors seek businesses with experienced management teams capable of executing growth strategies. Ensuring that your leadership can handle the complexities of scaling is essential.
PE firms are drawn to businesses with strong growth potential. A clear, data-driven strategy—market expansion, product development, or acquisitions—demonstrates your ability to scale sustainably.
Financial transparency and strength are crucial. Ensuring a clean balance sheet, strong cash flow, and accurate reporting will make your business more attractive to potential investors.
Investors will rigorously scrutinise every aspect of your business, from financials to legal structures. Having systems to handle this thorough examination will help build trust and ensure smoother negotiations.
A good cultural alignment between your business and potential investors is crucial for long-term success. A partnership that’s aligned on values and vision will create a more harmonious working relationship.
If your business model changes after bringing in private equity, it’s essential to consider how you’ll continue to motivate and retain key talent, especially if team members can no longer take ownership stakes. Alternative incentive structures, such as performance-based bonuses, long-term incentive plans, or other non-equity rewards, can ensure alignment with your new growth goals.
Private equity can shift how decisions are made within your business. Owners must be prepared for a different governance model, where key decisions may involve input or approval from the investor. Ensure you’re comfortable with this shared control before proceeding.
Case Study: Scaling a Technology Business with Private Equity
One company that successfully navigated the private equity journey is a mid-market technology firm that Baker Tilly Ireland advised. With a highly innovative SaaS platform but limited capital, the business needed a strategic partner to scale globally. Baker Tilly guided the firm through leadership optimisation and operational efficiency improvements, which helped secure a private equity investment.
The PE partner brought experienced board members, streamlined operations, and facilitated strategic partnerships.
The key to this success was the business’s preparedness for investment and a strategic PE partner aligned with its long-term vision. The result was a mutually beneficial relationship that unlocked significant value and propelled the company to the next level of growth.
The result? The company doubled its revenue and expanded into new international markets within three years.
Preparing for Long-Term Success
Private equity can offer businesses financial backing, critical strategic insights, and operational improvements. However, business owners need to assess whether this model aligns with their personal goals and how they want their business to evolve. By focusing on strong leadership, financial health, and a clear strategy, companies can benefit from the unique opportunities that private equity brings.
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