Trade sale is typically more straightforward, with cash on completion, supported by deferred money, or earn out. However, the buyers will typically impose their own culture, and often management’s, which can be disruptive for both sellers and employees. If there are synergies and growth opportunities however, a trade deal can provide management and finance, and increase the target’s value.
Private Equity (PE) involves both a sale transaction, and an investment agreement, to regulate the relationship between the PE House and the management team. Private equity may pay more and will be attractive where the target company can grow quickly, contains ambitious managers, or is capable of consolidating a sector. The quality of the management team is always decisive for private equity.
Private equity will look to generate investment returns, typically in three to five years, whereas trade can take a longer view. PE will also bring expertise and business connections beyond that of most businesses, often introducing senior nonexecutive directors, who can bring invaluable experience. Private equity are also more likely to perverse the culture and leadership of a target business, while a large trade buyer is more focussed on the combined buyer group, than the individual target business.
If you would like to discuss any of these themes further, please get in touch and let us know the PE House and management team:
Mobile: 07912 087173
Email: [email protected]
