Voted #6 on Top 100 Family Business Influencers, most influential expert on Wealth, Finance and Investments: Jacoline Loewen LinkedIn Profile

May 22, 2010

What qualities do private equity investors look for?

In addition to an outstanding management team and the firm’s performance at the transaction time, investors need to have confidence that the firm’s value is likely to increase after closing. The way a CEO communicates to the investor counts. Eric Burke, founder of Torquest Private Equity, pointed out that “investors never buy the hockey stick scenario”. If your company’s earnings have been steady in the last while but you are telling an investor that you expect earnings to go up rapidly like the shape of a hockey stick after a major capital investment, you need to provide solid information and reasonable assumptions to back up your projections.

Ultimately, an attractive deal to an investor is a business that has multiple competitive advantages that together act as a spring board to increase profits within a reasonable time frame, say 3 to 5 years. Truly outstanding competitive advantages are often unobvious to casual observers. Therefore, you as the CEO or your agent need to communicate to investors in a convincing way what the competitive advantages are and why they will be sustainable.
Jacoline Loewen, author Money Magnet
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