Private Equity in
SME sector
By: Shishir Jain, Managing Director, CX Partners
Email – shishir@cxpartners.in, 022-67431009
Role of PE Investor
Why private equity
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Enables growth
Efficient and creative capital
Brings insights, knowledge, expertise and relationships
Organize the business better
Plays the ‘Challenger’, ‘Critic’ role
Helps expands management bandwidth
Improvement in corporate governance
Perception improvement
What PE brings besides capital
- strategic
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Mid and long term strategy planning
Recruitment, retention and succession planning
Acquisition target / divestment strategy evaluation
Brand image
Corporate governance
Institutional approach to financial planning
Preparing for IPO / strategic value unlocking
What PE brings besides capital
- operational
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Management information system
Marketing strategy
International expansion
Product costing / production flow analysis
External relationship management
Inventory and supply chain management
Internal controls
What PE looks in
• Promoter and management team
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Ownership vs management
Track record of their dealings with business partners
Delegation / micro management
Accommodative to outside investors
Execution capabilities
• Clarity in vision / mission
• Business model
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Sustainability of business
Margins
Value proposition
Innovation / growth potential
Differentiating factor
Position of the company vis-à-vis industry
• Corporate governance
• Transparency
• Quality of reporting
• Valuation
• Handling of softer aspects
Exit Modes
• IPO
• Divestment / Secondary buyout
• M&A
• Leveraged Buyout (LBO)
• Buyouts
• Management Buyback
• Strategic Buyout
PE may not be an appropriate
solution for all situations
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Capital provider vs business partners
Emotions vs objectivity
Perpetuity vs limited time horizons
Stage of industry / company vs global practices