Many industrial and commercial sectors have reached a phase of maturity where organic growth is naturally hindered and external growth often becomes imperative. This is why some SMEs decide to acquire another company – to expand and consolidate their position in certain markets. Private equity is an advantageous option for financing such a project.
How private equity works
The term “private equity” refers to an equity investment in unlisted companies. Private equity experts assist company management by reinforcing the buyer’s capital base during external growth. In particular, they provide optimal purchasing conditions and ensure that the integration takes place seamlessly.
Why choose private equity?
Financing a company takeover with the help of private equity enables a company to augment its financial strength and flexibility so that the company can expand and remain competitive. Due to its liquidity reserves, the company has greater room for manoeuvre and is at the same time protected against the risk of rising interest rates, to which it would be exposed if resorting to traditional bank financing.
A true partnership
During the transition process, company management benefits from the investor’s expertise in business acquisition and from his overseeing of the transaction’s structuring, contract negotiation and due diligence. Post-acquisition, he can also offer the CEO tools for integrating the acquired company and for adapting governance to the size and needs of the new entity. The presence of a financial investor means the CEO can focus on managing the company.
It guarantees the creation of value for all shareholders. It is a win-win partnership for both parties.
Capital Transmission SA is a wholly owned subsidiary of BCGE with offices in Geneva and Zurich and has specialised in private equity transactions in Switzerland and Europe since 2008. Its team assists CEOs in their expansion projects from a turnover of CHF 10 million, regardless of the business sector. “Capital Transmission SA helps SMEs without interfering in their management, in the role of minority shareholder, without a seat on their board of directors,” explains Frédéric Tixier, Managing Director.
Greater resilience
In short, SMEs backed by private equity firms prove to be more resilient than their peers in times of crisis. Private equity financing is also well suited for business transfers, particularly in management.
