Navigating ambition in owner-managed businesses
For many owner-managed businesses, success relies on founders’ entrepreneurial spirit and ambition. Their dedication includes investment of hard work and capital. However, there often comes a time where additional funding can be a catalyst to accelerate growth.
Identifying available funding isn’t always the challenge – it’s deciding which option to go for. Moore Kingston Smith partners Stephen Orris and Jon Roberts shed light on this for us. The team works with ambitious businesses, helping them navigate the funding landscape and make informed decisions which support their individual growth strategy.
Finding the right funding option for business growth
For many, this leads to private equity investment. It offers the opportunity for rapid growth, supports majority or partial exits, helps optimise existing capital structures and drives expansion. Choosing what’s best for you requires clarity and understanding of ambitions and financing requirements. Approached correctly, PE can be transformative for growth, benefitting all parties.
Understanding buy and build with private equity
Buy and build is a powerful strategy for creating value and scaling businesses, by using a platform company as a foundation for add-on businesses that drive growth and synergies. The goal is to build a larger, more efficient and competitive group by combining collective strengths, knowledge and capabilities.
What makes buy and build so popular?
- Value creation: PE aims to help entrepreneurs grow value by streaming operations. enhancing market reach and improving competitive positioning and product or service offerings, resulting in revenue growth and cost savings.
- Diversification and risk mitigation: Acquiring companies across geographies, markets, or product lines diversifies revenue streams and reduces risk, cushioning the impact of economic or market-specific challenges. Combined resources, expertise and market presence drives rapid growth and market penetration.
- Talent: Acquisitions bring in new talent, expertise and ideas, enhancing overall capabilities. Leveraging diverse experiences drives strategic initiatives and operational improvements.
Implementation and challenges
- Target identification: Identifying suitable platform and add-on companies with the right culture, financial health, strategic fit and growth potential is critical.
- Integration: The integration process is complex and requires meticulous planning. Ensuring cultural alignment, harmonising operations and effectively managing change are essential to realising the full benefits.companies with the right culture, financial health, strategic fit and growth potential is critical.
- Management: Effective leadership is vital for success. Awarding management equity is a powerful tool in aligning interests and there are often complex tax implications for all parties to consider.
Areas to focus on
- Management team: A committed team that has the breadth and depth of qualities is a key criteria for partnering with PE. If the team is supported by a value creation story, manageable risk profile and the deal dynamics work for both sides, there’s a platform for success.
- Working capital: Investors require sufficient working capital to avoid further cash injections post-deal.
Choosing the right funding strategy is key to driving growth and realising your business’s ambitions. Despite a continually evolving PE landscape, buy and build remains a solid strategy for achieving sustained growth and profitability. Having recently secured investment itself, Moore Kingston Smith is living and breathing PE, enabling the team to bring that lived experience to clients.
The team’s tailored advice spans deal advisory, due diligence, accounting judgements, audit, debt advisory, exit readiness, corporate tax and valuations. With expertise and experience in and around the Thames Valley, they help clients navigate challenges and seize opportunites, designing bespoke solutions for maximum impact.
*This article is intended solely for information purposes and doesn’t constitute advisory, accounting or investment advice.
For more information contact:
Stephen Orriss, M&A Partner – [email protected] – 07788 720 248
Jon Roberts, Audit Partner – [email protected] – 07976 198 459
