Narrow the search
Compared to a strategic acquisition, a private equity firm is much easier to find because it’s only concerned with rate of return. It’s still not simple, but if your potential and plans for growth are obvious, you probably won’t have to look too far for a willing investor.
“If you have not reached maximum market penetration and if your business is fairly scalable — meaning it can be replicated beyond the domain that you’ve already taken up — then [you] would be open to interest from a private equity firm,” Fink says.
Still, you have to research each firm relentlessly.
“Aside from getting married, this is one of the most important decisions in your life — even more than buying the right house or the right car,” he says.
Begin your search on the Internet. Each firm’s Web site should answer most of your questions. If the Web sites don’t, the missing information should speak louder than what is there.
Be wary, for example, if the principals don’t post their resumes. You should be able to track their expertise to separate business-savvy investors from merely wealthy ones. After all, your new partners will put more than money into your business; they will become consultants, as well.
Small details about the company are just as important as obvious red flags like lawsuits. Examine the company’s holding pattern. The difference between keeping a company two years and 10 years may mean it either wants to “fatten the calf … and sell it again or … really polish the diamond,” Fink says.
