Smoothing your partnership with a private equity investor
Advisers offer these tips for family business owners considering partnering with private equity:
• Before embarking on a private equity deal, families should decide what their priorities are for the family enterprise and the family as a whole. “Families should define for themselves what their definition of success is and what the best outcome would be,” says Patricia Angus, co-director of the Family Business Program at Columbia Business School and CEO of Angus Advisory Group.
• If private equity is the choice, it’s crucial to pick a partner whose goals and objectives match the family’s priorities.
• To help avoid future conflicts, establish a set of ground rules governing the partnership, such as levels of debt and control. Underlying issues must be ironed out in advance, says Carrie Hall, who leads Ernst & Young’s Family Business Center of Excellence in the Americas. Rules should be put in writing.
• Reach out to other business families that have partnered with the private equity group you’re considering. Find out how the investors behaved when times were good and when times were rocky.