Are there different types of private equity firms?
If you are looking to start or expand a business, there is a good chance you will want to find funding to ensure you get off to the right start. If you have settled on working with a private equity firm, it may surprise you to learn that there are different types of these firms. The type you choose will depend largely on what you want to accomplish with your company and whether you can find a private equity firm that aligns with your values.
Let’s start with what you want from your company. Are you looking to retire within the next five years, or do you want to stay at the helm for the next 20 years and see your dreams of expansion come to light? There is no wrong answer here, but your answer will make a difference in determining the right type of equity partner for you.
Types of Canadian private equity firms
There are two main types of private equity firms in Canada–lenders looking to make majority investments, and lenders specializing in minority investments.
With a majority investor, the firm will be looking to acquire a majority share of the company, which typically grants them control over finances and operational decisions. If the company has a board of directors, the majority investor will usually have more seats/votes than the non-controlling partners.
If you are interested in selling a majority share of your company, you may be working with, or for, your investors for the foreseeable future; or if you’re selling so that you can retire, you are entrusting the legacy of your company and your employees to this new ownership group. Whatever your reason for giving up majority ownership, it is important to have confidence in the firm you choose.
Minority investors work a little differently as they will own less than 50% of the company. This is a good structure for owners who want to cash out some of their equity but also want to continue working for the company and retain control over its direction, finances, operations and growth strategy.
For an investor to purchase a minority share, though, they will need to have a very clear idea of how their investment will be used to ensure that it makes sense for them. To find the right minority investment partner, one should speak to them about their expectations and what they can bring to the table in addition to their capital. With a minority investment, the partner you choose should align with your values and the vision you have for your company.
What kind of private equity firm is CBGF?
CBGF acts as a patient minority partner. Unlike most traditional investment firms, we want the entrepreneur to stay in the driver’s seat and support them and their ambitious plans for growth. We look for investment opportunities in companies where we have aligned values, and where we can work alongside the owner or founder to help the company thrive and succeed over the long term.
If you are seeking a minority partner for your company, contact us today to start the conversation.