The rise of minority stakes in private equity

29/03/2022
Read Time: 2 Min

Suzanne Pike recently spoke to Real Deals about how minority stake deals can be a great opportunity to invest in fantastic growth businesses that wouldn’t otherwise necessarily come to the market. Suzanne explained to Simon Thompson that for ECI, the difference between the two deal types is not the key driver for whether or not we’d look to invest in a business:

“We haven’t overly dwelled on the difference between minority and majority, because for us, it’s not about additional controls or fewer controls because we always look to work in collaboration with management teams. We look at all the factors and assess what everybody around the table wants from the deal. Ultimately we look for growth, resilience and a team that wants to work with us.” This approach is what has led to about a third of ECI deals being minority stakes.

The rise of minority deals has in part been driven by private equity firms becoming more creative in how they can unlock potential investments, but also by management teams themselves. Increasingly such liquidity events are not being driven by founders who want to retire, but by CEOs who still want to retain control of their business, but also recognise that private equity partnership can be a way to turbocharge their vision for the future. It allows for a liquidity event now while management teams can continue to invest in and benefit from the growth potential of their businesses. Suzanne elaborates on this point:

“If I take just one area where ECI can support management teams, it’s around M&A. A minority investment can provide capital for acquisitions, but it’s also an area where ECI has a lot of experience and expertise. We can work with management teams on their M&A strategy, use our proprietary AI tool Amplifind™ to help them map the market and our Commercial Team can work with them to integrate acquisitions and drive synergies. This sort of initiative is where you can bring all the different value levers to bear for a management team, whether it’s a minority or majority investment. We care so much more about being able to deliver on the growth potential of the business, than about the formalities of the structure.” 

If you’d like to find out more about how a minority (or a majority!) investment might work for your business, please do get in touch with suzanne.pike@ecipartners.com.

About the author

Suzanne Pike

My role is to make sure we know the best growing and resilient businesses there are, and that they know and want to work with us. Post-investment, my team and I provide hands on support to the businesses we back to develop their M&A strategies.

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