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private equity
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venture capital money
minor league sports
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equity advisor
sports franchises
eggs in one basket
Questions To Answer When Determining If You Are The Right Person To Lead A Private Equity Buyout
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Once you have a company that has agreed to do a deal with you and a private equity company, you still have to sell you and your leadership team to the private equity investors before they will agree. Venture capital money is not likely to go where there is any management risk at the outset. They must believe that you have the right team for the deal. I have over 20 successful years as a senior leader and entrepreneur and I have been able to have multiple successful deals go through. I have learned some back test questions that need to be addressed if you want a deal to be reached with a private equity firm. These questions will be discussed in narrative form below.

Mickey, Larry, and Wayne are all senior executives with minor league sports franchises. They have recently been trying to use their skills and experience to land a private equity deal with industry targets. I have been coaching them on what to expect and how to prepare for the first deal.

"Hey, Jay," Wayne called as I approached. "How are you?"

"I am good, Wayne, I said looking at him and then the others, "How are you all?"

We shared our hellos and I again asked for the latest on their teams. Once satisfied, I began our session, "So, Larry, how is it going with the sports apparel and merchandising business? Any further talks?"

"With ProAllStars? I spoke with the CEO last week. I intend to follow up every month or so, like you said."

"Ah, yes, I remember," I said. "How many other businesses have you identified?"

Larry was quiet. "I am working on it. It's just that I thought this deal would go through, and that would be that."

"Are you even interested in being a private equity advisor?" I asked.

"Yes," he said begrudgingly, "I just need to put a bit more time into it."

"I'll say," said Mickey giving him a bit of an elbow.

"I promise I will have a list of at least five targets for next week. I will not put all my eggs in one basket," Larry said at half-volume.

"Is there a one of those back-tests we could use to be sure we are ready to make the sell to venture capital investors?"

"Sure," I said, "if you think it would help."

They all nodded aggressively.

"Test one is quite simple," I said. "It is has the CEO led a similar-sized or smaller company in the target industry before? Since you guys intend to be CEO, make sure the target operation is the same size or smaller than your professional baseball, basketball, or hockey team."

"Easy enough," said Wayne.

"The next one is have you and your management team affectively improved the value creation opportunities that exist in the target company. Both tests just relate back to the idea that you have been here and done that, sort of thing."

Larry and Wayne nodded. Mickey spoke, "This is good timing, because I have a scheduled call with the CEO of Weightlosstribune this week. I will definitely be prepared to correlate my experiences to that business."

"Holding back on us, eh?" said Wayne smiling.

"No," said Mickey. I just knew that this is the start of the process. I will be sure to do my homework to ensure that it is the same size business, or a bit smaller, and I will have stories to correlate that business with my professional hockey team."

"Good," I said. "If you do that, you will be in good shape when talking to the private equity investors."

We scheduled out next week's meeting, and parted ways.

Thanks for reading.


Street Talk

Want to sell your business? Contact me. J.

Reply
  about 7 years ago
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