Five success factors for turnarounds of private equity-owned businesses | EY - Global
The huge sums that private equity firms make on their investments evoke admiration and envy. The chief advantage of buying to sell is simple but often overlooked, explain Barber and Goold, directors of the Ashridge Strategic Management Centre. Once that gain has been realized, private equity firms sell for a maximum return. A corporate acquirer, in contrast, will dilute its return by hanging on to the business after the growth in value tapers off. Public companies that compete in this space can offer investors better returns than private equity firms do. The latter would give companies an advantage over funds, which must liquidate within a preset time—potentially leaving money on the table. Both options present public companies with challenges, including U.
What is a Private Equity Deal? - All You Need to Know
Public companies have long used stock options and other equity-based incentives to reward their executives. As a result, stock options have become an extremely lucrative portion of the total compensation for executives of publicly traded companies. Considering the enormous amount of wealth that has been created through stock options for executives, it should come as no surprise that private companies find themselves at a disadvantage in attracting, retaining, and motivating top executive talent, largely due to their limited ability to issue stock options. Now, however, a growing number of private companies are looking for -and finding - ways to compete for executive talent by offering their own version of equity-based or equity-like incentives.
If you run a successful, fast-growing business, chances are that you might encounter private equity firms interested in buying your company. While that can be a thrilling development for an entrepreneur, it's worth knowing how those private equity firms think about you and your business--and how they will try to maximize their investment--before you take the plunge in selling to them. The first thing you should realize is that most PE people are bankers and investors-- not operators. They've never sweated making payroll or doing the dirty work to fix margins like you have every day of the week. Many of them will have MBAs and other advanced degrees from big-name schools.