What private equity investors look for in a business

BGF, the UK and Ireland’s most active investor, explains how private equity investment plays an important role in helping businesses of all kinds to grow.

Private equity is usually distinguishable from venture capital (VC) investment by the growth stage of the target business. VC investors tend to target early-stage companies, while PE investors tend to target more established businesses. However, the aim in each case is to achieve growth.

Entrepreneurs should seek independent advice before making the significant decision of whether to sell part of their company.

Which investors are interested in your business?

PE investors come in different shapes and sizes. Some specialise in a specific sector, such as healthcare, while others are generalists who invest across all sectors.

Some aim to make only large deals, while others target smaller deals. Others characterise themselves by the expertise they offer – for example, they may excel in helping companies expand internationally.

Another point of difference is that some PE firms will only invest in exchange for a majority stake that gives them control of the business. Others are willing to be minority shareholders or to co-invest alongside other investors.

In short, there are many reasons why a PE investor may be interested in your business, including your sector, the stage in your business life cycle, the location of your business, its valuation, or its financial position.

A crucial first step in attracting a PE investor is to understand which qualities of your business may be attractive to which investors.

Do you have sufficient financial information available?

PE investors pride themselves on making sound investment decisions based on all the financial information available to them. This information is likely to extend beyond the accounting documents you compile annually or quarterly, and might include:

  • market data

  • supply chain information

  • information on customers (existing and potential)

  • other forms of market analysis

Intricate financial records, extending over relevant timelines, will be crucial during any negotiations. Keep in mind that PE firms will likely want to run sophisticated reports and request projections based on a variety of factors, so having a reliable financial function to handle these requests will be helpful.

Investors will want to see a clear vision for the future of the business that supports the long-term growth ambitions explained in your business plan

You will also want to ensure your accounting practices comply with the relevant reporting standards.

Do you have the right people with the right expertise?

Potential investors will be keen to get to know your management team to develop a good professional relationship based on trust, so be prepared to have meetings with them before a deal is signed.

They will not be looking solely at how your team performs and how skilled they are, but at what their responsibilities are, their key measures of success, and more.

One crucial person in the transaction will be your finance director or chief financial officer (CFO). It can be beneficial if your CFO has experience handling the requests that are common from PE houses because this can help the process run more smoothly.

In general, it’s important your management team is aligned on the main issues. Investors will want to see a clear vision for the future of the business that supports the long-term growth ambitions explained in your business plan.

Do you have the right plan to appeal to PE investors?

It’s important to be able to communicate your growth plans for the business. By investing in you, a PE investor is joining you on a journey. You want to show them the destination you hope to reach and how you plan to get there.

Equally, you should consider that a PE investor may have their own ideas about what the growth plan for the business should be. Be upfront about your ambitions to ensure your interests are aligned with those of your investors:

  • be very clear about the timelines for your plan

  • bear in mind that some private equity firms may wish to achieve a return on their investment within a relatively short time period, perhaps one or two years

  • make it clear in your business plan if you are looking for long-term rather than short-term financial backing

This article originally appeared on the BGF’s Insights Hub.


BGF provides growth capital to SMEs across the UK and Ireland, investing across sectors and in every region.

BGF is a minority investor that invests in businesses we believe in, without seeking to take control. We invest patient capital meaning we don’t set hard exit timelines, allowing companies in our portfolio to grow sustainably at a pace that is appropriate for them.

BGF typically makes initial investments of between £1m and £15m. The combination of being a minority investor of patient capital that makes investments of this size is distinctive and distinguishes BGF from most of the private equity industry. For this reason, BGF’s offering is different by design.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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