A Guide to Private Equity - BVCA admin

The investment process
The investment process, from reviewing the business plan to actually investing in a proposition, can
take a private equity firm anything from one month to one year but typically it takes between three
and six months. There are always exceptions to the rule and deals can be done in extremely short
time frames. Much depends on the quality of information provided and made available to the private
equity firm.
Reaching your audience
When you have fully prepared the business plan and received input from your professional adviser, the
next step is to arrange for it to be reviewed by a few private equity firms. You should select only those
private equity firms whose investment preferences match the investment stage, industry, location of,
and amount of equity financing required by your business proposition.
Confidentiality
If you wish to use a confidentiality letter, an example of one can be obtained from the BVCA’s website.
The general terms of this letter have been agreed by BVCA members and with your lawyer’s advice
you can adapt it to meet your own requirements. You can then ask the private equity investor to sign
it, before being sent the full business plan. We would recommend, however, that you only ask for a
confidentiality letter when the potential investor has received your Executive Summary and has shown
an interest in giving your proposal detailed consideration.
How quickly should I receive a response?
Generally you should receive an initial indication from the private equity firms that receive your business
plan within a week or so. This will either be a prompt “no”, a request for further information, or a
request for a meeting. If you receive a “no”, try to find out the reasons as you may have to consider
incorporating revisions into your business plan, changing/strengthening the management team or
carrying out further market research before approaching other potential investors.
How do private equity firms evaluate a business plan?
They will consider several principal aspects:
• Is the product or service commercially viable?
• Does the company have potential for sustained growth?
• Does management have the ability to exploit this potential and control the company through the growth
phases?
• Does the possible reward justify the risk?
• Does the potential financial return on the investment meet their investment criteria?
26 A Guide to Private Equity