Every business is different

Every business if different. And so are the private equity and venture capital managers.

There is a common perception all PE Investors have the same style and business model. But the reality is very different.

Direct Capital has been at the forefront of developing New Zealand’s private equity industry since 1994.  Direct Capital is itself a private company, owned by its executives.

For more about Direct Capital visit their website here.

The following guideline has been provided courtesy of Direct Capital as an example of how the investment process works with Direct Capital. Ask your PE Investor how they would work with you.

Right from the very first contact, Direct Capital is up-front and completely transparent about the process ahead. Although every business they work with is different, the following is an guideline of what’s involved.

Meet and greet

A confidential meeting and open discussion between Direct Capital and the business owner and/or management team. The discussion is about the business, the opportunity and what they’re aiming to achieve. Both parties have a chance to gauge whether we’re a good fit.

Initial assessment

If the opportunity seems right, then Direct Capital start doing their homework. They engage in research and conclude whether Direct Capital is the right business partner for the business and the situation.

Getting to know each other

If the management team is going to be part of a broader ownership team, then Direct Capital like to meet them as well. It’s important to determine whether there is mutual interest in working together, that both parties get on, and have key values and aspirations in common.

The investment

This is the point where discussion explores various ways in which value can be set and the investment structured. By this stage there’s a collective interest in going ahead with an investment, so there’s a common desire to accommodate each other’s preferences.

Deal or no deal

After completing these steps (which can happen in as little as a week or two), there can be mutual agreement on an investment, or simply move on. The process is that there is no consequence if there is no investment. Direct Capital are not competitors of the company, and they will keep anything entirely confidential.
If there is a mutually acceptable deal, the process moves towards documentation and due diligence. The time-frame for this varies hugely depending on how readily available company information is. It can take from two weeks to two months.

Due diligence

Up until now, it has been assumed that the picture that’s been painted of the business reflects the reality. The due diligence process gives an assurance this is the case and that a transaction can proceed with confidence. Due diligence won’t be undertaken until all other matters are agreed.

Signing on the dotted line

The full and final terms of the transaction are documented and checked. The Sale and Purchase and Shareholders’ agreements are signed, and the transaction completed.

Article provided by Direct Capital