The field of private equity seems elusive, hidden, and very complex. It is indeed true that private equity specialists like Gregory Lindae operate according to a number of very specific strategies, and that they are keen to keep at least some of that a secret. This makes sense, because their work is also highly competitive. That being said, there are a number of things that they are happy to share about how they find the most profitable and successful deals in private equity. Let’s take a look, therefore, at six of those “secrets”.
6 Secrets to Successful Private Equity Deals
- It is all about being in the right place at the right time. Private equity experts like Lindae spend most of their time together with entrepreneurs. This includes conventions and business events, but also online meeting places. They make sure that they are always in the thick of the action, so that they are first to hear about a potential new big deal. They know what will happen long before the general public does.
- Experts spend a great deal of time researching the background of any firm that they may be interested in. They never take someone’s word for how great a company may be, or how sure they are about their projections. Rather, they exert due diligence and find out exactly where a company stands. Truly shrewd investors like Lindae always make sure that a firm they are interested in covers a sustainable, large market. They also make sure that there is a proper exit strategy in place. Lastly, they investigate the financial assumptions, ensuring they are realistic.
- A good private equity investor will spend a lot of time looking into the management capacity of a firm they are interested in. They want to make sure that these companies can truly deliver, which means having the right leaders in place. Good management equates to good opportunities, because good managers will go elsewhere with their talents otherwise. Hence, investors search for experienced teams in which each individual has a track record of excellent ROIs.
- Lindae peruses over the exit strategy as well. Liquidity events offer excellent investment rewards when a project is refinanced or sold, so it is important that the exit strategy has to be in place, is properly understood, and is based on facts and data.
- Due diligence must be exerted across the board. This also means that any investment made has to be in line with the goals of the professional themselves. This means that people like Lindae look into the business plans of prospective companies first.
- Diversification is key to being successful. While investments have to be in line with the goals of a private equity firm, they should all be different investments. This avoids a bad financial decision from destroying a portfolio as a whole.
A final thing to remember is that, while these secrets are hugely important, they do not guarantee success. Indeed, private equity investors know that they could lose it all, yet are willing to take that risk.