Considerations for the company

Key considerations a Private Equity firm would need to take into consideration include:

Financially

  • Development capital introduced to provide headroom within the company and ability to deliver growth strategy
  • Private equity have the ability to remove any bank financing, therefore, less onerous covenants with reduced reporting to the bank

Ongoing cost

  • Non rolled up loan note interest
  • Private equity house monitoring fee
  • Chairman fee

Corporate

  • Appointment of chairman
  • 10 board meetings required per year
  • Monthly management reporting to private equity house
  • Appointment of Investment Director and board observers
  • Raise profile and credibility of the company by having private equity investment
  • Improved internal systems and procedures

Trading

Typical consent matters, which would require approval from the private equity house before being actioned:

  • Make material change to nature of the business
  • Capital expenditure over a set value
  • Entering into contracts over a set value, onerous or not at arms' length
  • Acquiring or disposing of businesses
  • Enter into partnership or joint venture
  • Appointing senior or high paid staff
  • Appointment of Statutory Directors
  • Changes to share capital
  • Appointment of auditors
  • Make any change of bank or terms of any mandate given to any banks
  • Borrow or lend any monies

Further reading