Bass, Berry & Sims private equity and M&A attorney Ryan Thomas provided insight for a Nashville Business Journal article about what companies wanting to pursue private equity investment need to know and the benchmarks they should meet for a successful deal. Ryan emphasized that companies in search of growth equity should have, at a minimum, $1 million in earnings before interest, taxes, depreciation and amortization (otherwise known as EBITDA). Additionally, companies should have high year-over-year growth trends, an established pipeline of new business and an attractive market.
“Growth equity versus private equity is typically appropriate when you do not want to concede control or cannot get the premium you would desire for a full company sale, but nonetheless can use capital to accelerate growth,” Ryan noted. Furthermore, private equity deals involve full acquisition or relinquishment of control, which could be ideal for a founder of a family owned business with no succession plan but has a desire to maintain a role within the company.
“In either case, if you are a company that can use investment capital for growth or acquisitions, and there are no reasonable debt financing options available, exploring a private equity investment may make sense,” Ryan explained. “Likewise, if you feel you need additional strategic connections or mentoring to accelerate growth, a growth or private equity firm may be helpful in that regard.”
The full article, “Ready for Equity?: The Art of Deciding When to Pursue Outside Investment,” was published by the Nashville Business Journal on August 10, 2018, and is available online.