Free Newsletter
To readers: M&A Monthly columns consist of paid content from companies and organizations that have information and opinions to share with the business community. They do not represent the views of Minnesota Lawyer. Columns are accepted on a variety of topics and are subject to approval by Minnesota Lawyer management. To contribute contact Bill Gaier at 612-584-1537 or [email protected].
By: Leah M. Berend, CPA
Private equity firms have often been perceived as opportunistic, solely focused on maximizing profits by swooping in on struggling companies and selling off their assets (see the 1990’s film Pretty Woman). However, delving deeper reveals that these firms have more to offer than meets the eye. In fact, private equity can serve as beneficial partners to organizations, not just in financial matters, but also in non-financial ways that are often overlooked.
One significant advantage of teaming up with private equity lies in their decisive leadership. These firms possess a clear vision for enhancing their portfolio companies and are unafraid to make tough decisions, even if they may not be universally popular. This characteristic can be valuable when addressing non-financial challenges, such as cultivating a positive company culture, attracting top talent, and refining business strategies.
For instance, a private equity firm may work with a company to introduce new policies and procedures, fostering an improved culture within the organization. By injecting capital, they may empower the company to attract and retain skilled professionals. Furthermore, private equity partners might assist in developing a new strategic plan and enhancing governance and risk management practices.
Another compelling aspect of private equity partnerships is the abundance of resources they bring to the table. These firms often amass a wealth of industry-specific and cross-industry knowledge, along with an extensive network that can be leveraged for the benefit of their portfolio companies. Such expertise can be invaluable across various areas, including marketing, sales, and operations. The extensive network can facilitate access to new markets, partnerships, and capital-raising opportunities.
To illustrate, a private equity firm may guide a company in entering a new market by connecting them with potential partners already established in that domain. Similarly, they can introduce the company to potential investors, simplifying the process of raising capital.
Private equity’s goal-oriented approach is yet another aspect that can be advantageous to organizations seeking growth and improvement. Driven by the objective of creating value for their investors, these firms are willing to take calculated risks to achieve their goals. Such a mindset can be instrumental for organizations in pursuit of progress.
For instance, a private equity partner might provide the necessary capital, resources, and connections for a company to expand into new markets successfully. By implementing new processes and systems, that can also help the organization streamline its operations. This results-oriented approach may lead to the development of new products and services, expansion into untapped markets, and improved financial and business metrics, ultimately bolstering the entire organization’s performance.
Despite their merits, private equity firms are not without their critics. Some argue that their focus on short-term profits can be detrimental, and they may be perceived as disruptive to the companies they invest in. However, it is undeniable that private equity can play a significant role in creating value for organizations. Through their decisive leadership, extensive resources, and goal-oriented mindset, they can serve as valuable partners to organizations seeking growth and improvement.
As organizations consider partnering with private equity firms, it is necessary to recognize that the value derived from such partnerships depends on the specific needs and objectives of each organization. The future holds promising opportunities for collaboration with private equity firms, as they can leverage their connections, expertise, and acumen to leave organizations in a better state than they found them. Ultimately, private equity has the potential to unlock hidden potential and pave the way for meaningful growth and transformation in organizations.
Leah Berend is the Chief Financial and Chief Administrative officer of Oxbow Industries.
With over $2.5 billion corporate financial transactions completed, Oxbow Industries is dedicated to building businesses in partnership with their management teams. Oxbow seeks to invest in leading middle-market companies with outstanding leadership teams and a significant opportunity for equity appreciation. Learn More at www.OxbowIndustries.com
