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How Businesses Can Raise Equity For Expansion


04/08/2011

Top tips from across the pond on planning a successful liquidity event

By Richard J. Salute, a friend of Smith & Williamson and a Director at J.H. Cohn, based in New York.

For privately owned companies, a liquidity event – giving up equity to finance the business – can be both exciting and overwhelming. On the one hand, you have access to enhanced funding to grow the business. On the other, there will probably be a new set of shareholders, an independent board of directors and regulators to whom you are now accountable.

J.H. Cohn recently hosted a panel debate to gain insight into...

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...the liquidity process. Panel members included leading US private equity firms, investment banks, and legal and financial advisers. Below are some of our top tips for making the transition as smooth as possible, based on their expert views.

1. Understand your objectives

Be clear about what you want before entering any equity relationship. Is the goal to get a capital injection, bring in a partner or sell the company? Every day, you need to make sure your plans are still relevant.

2. Know your differentiators

Know how your business is different from the competition; the business model creates business value. Communicate the distinct differences to your advisers. This will improve your relationship with your advisers, who will be in a stronger position to attract suitable investors.

3. Seek out cultural similarities with advisers

Choose an adviser that is a good cultural fit and which views your organisation as an important part of its portfolio. They should have good knowledge of the industry in which you operate, having done a significant number of transactions in that area already – you don’t want them to use your business as a training ground.

4. Understand the adviser’s role

Establish what it is your advisers want and why they... continued on page two >

 

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