Three Private Equity Firm Myths To Ignore

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Three Private Equity Firm Myths To Ignore

17 December 2015
 Categories: , Blog


Partnering with a private equity firm is an excellent way for an organization to get the capital it needs to grow and excel. Unfortunately, a number of business owners miss their opportunity to experience these benefits because of myths. Here are just three equity firm myths you should be ignoring if you are considering this type of partnership.

Firms Are Only Interested In A Quick Financial Fix

Private equity firms aren't just interested in a quick, financial fix. They are equally concerned about improving the overall performance of the company as well. The fundamental reason for this is greater investment security.

These firms aren't interested in handing over a large sum of money to a company that will only fail due to poor operational practices, ultimately causing them to lose their money. These firms want to ensure that their investment is stable and will therefore take an equal concern on improving the operation of the company.

Firms Come In Like A Ruthless Takeover

There is also the concern that equity firms often come into a company with force, firing managers and liquidating assets, making it feel more like a ruthless takeover than a partnership. The reality is that the firm will make some changes; however, this doesn't have to include a complete overhaul.

If the company is sustaining itself, making a profit and remaining productive, the equity firm isn't going to come in and try to fix that which isn't broken. The terms of the investment are generally clearly laid out before you sign any agreement forms. If you don't agree with the new terms, you don't have to accept the offer.

Firms Only Offer Capital

Especially if you are dealing with an experienced private equity firm, don't at all believe that the only value they can bring to an organization is capital. Experienced firms often have a certain industry in which they generally invest. This history of similar investments allows them an inside glimpse of how businesses within a particular industry operate, both the good and the bad.

This invaluable experience can be brought to your organization to help you excel and avoid pitfalls previously witnessed. Remember, a return of investment is the most important thing to an equity firm, so they are going to do everything in their power to keep your company profitable.    

Don't let a myth keep you from a partnership with a private equity firm. Do your research and ask questions to find a firm (such as RLS Associates) that is best aligned with your goals.