What Are We Looking For?
As a rule of thumb, unless a business can offer the prospect of significant turnover growth within five years, it is unlikely to be of interest to a private equity firm. Private equity investors are only interested in companies with high growth prospects, which are managed by experienced and ambitious teams who are capable of turning their business plan into reality. However, provided there is real growth potential the private equity industry is interested in all stages, from start-up to buy-out.
When analyzing and making decisions on possible investment opportunities, Nexus puts special attention to whether and to what extent the following elements :
- High growth, competitive products or services;
- Detailed and realistic business plan;
- Clearly defined medium-term business and financial goals;
- A quality and stable management team, capable of turning the negotiated goals into reality;
- Solid management procedures, either already in place or able to be quickly put in place;
- A transparent legal structure where personal and professional assets are not entangled;
As well as to what extent potential investment conditions meet the following criteria:
- Attractive rate of return on invested capital;
- 25% - 50% ownership stake in the company (preferred, however case by case);
- Controlling influence in shareholders' general meeting;
- Internal control and supervision of company's finances (uses of funds);
- In the case of disposal or transfer, a loan capacity and recurring profits;
- An agreement on the fund's exit, with or without the head of the company.
The abovementioned conditions and elements represent the basis when taking into consideration a possible investment. However, as every business opportunity has its own specific characteristics (economic, technological, legal etc.), each investment requires a unique approach and structure in order to incorporate these conditions and elements in the best possible way.