What is the time horizon of PE investors?
Typically a PE/VC investor is committed to staying invested in a company for a long period of time, which can range between 4 and 7 years.

What sort of value add do PE investors bring to the table?
Private Equity firms work closely with their portfolio companies to support their growth efforts. Examples of areas where a PE firm will add value to the company include Strategic Planning, Business Development, Executive Recruitment, Enhancement of Financial Processes and Financial Advisory work (Fundraising and IPO support).

What kind of control do PE investors seek in their portfolio companies?

Depending on the kind of capital provided, private equity firms will either assume control of the business or remain as minority investors in a company. Minority investors such as Lighthouse do not interfere in day to day management issues but require certain information and governance rights. Common types of rights relate to fundraising, capex, transfer of shares and anti-dilution.

What is the best way to reach PE firms?

Investment bankers and other advisory firms are well equipped to advise on capital raising issues for a company and are competent in putting together the necessary material (information memoranda, corporate presentations) to connect with private equity firms. Their networks extend to multiple PE firms, which can further help the process of price discovery. However, reaching out to a PE firm directly (which Lighthouse is very open to) can allow a more focused approach on all the critical aspects of a potential partnership and allow a period of developing greater comfort with the partner.

How much time goes by in closing a deal typically?

Timeline to close a deal can vary from case to case depending on the level of complexities involved in the transaction. Business evaluation and transaction execution are the two main stages of the process. The initial business diligence, meetings with the promoter and management team takes about 4-6 weeks after which a term sheet is issued. Post that, the legal, financial and third party due diligence and preparation and execution of shareholder agreements could take around two months.  However, no deal is typical.  At Lighthouse we have closed deals in 8 weeks and in 8 months!

How is valuation determined?

Key factors that influence the level of valuation include quality and competency of the management team, industry structure, competitive positioning of the business, past performance and future expectations of the business as well as the type of capital and other value add that the investor will bring to the company.

How do I select the Fund that is most appropriate for me?

Most importantly, the company and its management should carefully evaluate the people it will work with because these are long term partnerships that last 5 to 7 years. The company should also assess what sort of value the investor will add to the business. PE firms may also have in-built specific sector expertise which can be of critical use in certain situations. We encourage all companies to do reference checks on the PE investors they are considering.

From where do private equity funds raise their capital?

PE funds raise money from a mix of institutional investors and high net worth families. These clients may be either based domestically or internationally and comprise of global pension funds, fund of funds, family offices and sovereign wealth funds.

When is the most appropriate time to raise funds via the Private Equity route?

A company can raise funds via the PE/VC route at any point in its life cycle. However, since PE/VC is a very expensive source of capital, it is in the best interest of the company to go down this route only when it is confident that the use of funds will generate healthy returns on the capital raised.