There are many reasons why a company might turn to outside investors. It all depends on the company's objective – is it a matter of finding the right partner, structuring a transaction and a sustainable collaboration framework, or creating maximum value for all parties?

Why open up your company to investors?

Financing growth in all its forms (acquisition, human resources, investments...) can be done in many ways.  The degree to which a company is in debt and its ability to repay new debt may hinder its access to traditional bank financing. Bringing in a third-party investor can prove to be a cost-effective alternative for supporting development. Increasing capital in order to strengthen a company's equity with new cash is a growth accelerator that should be considered. A company can involve a new investor by selling a part of the share capital to that investor, thus realising a cash out which will not bring any additional funds to the company but will, for example, enable a minority shareholder, often a family shareholder, to sell their stake. These two types of actions can be combined. 

Who should your investor be?

Choosing an investor is a complex process because it entails finding a suitable partner for the company.  The selection criteria used to make such a decision should be strictly aligned with any predefined objectives (sustainability, development, search for synergies or specific competencies, etc.). The criteria should also make it possible to pinpoint a desired investor profile, whether the target is a strategic or financial investor.
A leveraged transaction, such as a Leveraged Buyout (LBO) or a management buyout can be used –  even for a partial transfer of ownership – to meet the same objectives and limit the dilution effect.  Doing so, however, will require an additional layer of financial engineering.

Words to the wise?

A shareholder's agreement is key for solidifying any decision. Preparing this agreement requires expert guidance. It consists of setting down the rules for future changes in the distribution of capital while maintaining the initial philosophy and objectives of the partnership.
As a specialist in company sales since 1994, Dimension SA, a wholly-owned subsidiary of Banque Cantonale de Genève, has the know-how and network of investors to conduct this type of operation on behalf of its client