The first question: Is it an offer you can’t refuse? The second is can you still see the forest despite the trees? That’s important, because initially you might be swayed by the money, but what comes with the money is the question.
A private equity firm will have a hefty pool of capital, but their ultimate goal will be to sell the company or business you worked hard to build for a sizable profit. A good portion of which goes to them because they will own it. If you can live with that, fine. If not, continue reading.
As a manager-owner who will have skin in the game, it had better come with good chemistry. Make sure everyone gets along and has similar business philosophies. And never do a deal without first performing your own due diligence. And that should include speaking with other portfolio companies of the private equity firm that’s approached you.
Next question? Will the private equity firm be hands-on or hands-off in regards to daily management? And how will your team feel if the firm wants to put their own management in place?
Other things to consider? What’s your best alternative to taking the offer? Could it be an operating change? A bank loan perhaps? Maybe it’s someone else who will buy out your silent partner? Or something as simple as a staffing change?
One last thing...what if you find the formal offer looks a lot less rosy than the get-to-know-you dinner? With all that in mind, if you feel a little like a fish out of water, maybe it’s time to talk to us?