When it comes to making time to juggle the responsibilities of selling your company, John Nestor’s advice is simple.
“Sleep faster,” says the CEO and senior managing partner of Kirtland Capital Partners.
His second piece of advice is to take time upfront to choose a private equity firm that is the right fit for your company. To do that, he suggests you slow down and scope out several firms before making a decision.
“Management teams need to do some checking on the private equity firm that they’re thinking about (partnering) with,” says Nestor, who manages 20 employees and $293 million in capital at Kirtland.
Your research should start with the CEOs of other companies that are held by each private equity firm because they can provide the best insight about what it’s like to work with the partner in the daily course of business.
“All private equity firms can tell management teams what they’re like to work with,” he says. “The check in all of that is to have them talk to people who have actually worked with them.”
When you talk to those CEOs, ask questions such as how the partners in the equity firm respond to news — both good and bad — and the amount of control they take in decision-making.
Talking to those people can also give you clues about the types of companies the firms invest in and what areas of expertise they bring. Also, look for examples of how the firms have grown other companies, whether through acquisitions or geographic expansion.
Meanwhile, the private equity firms will be checking you out, too.
“It’s important for us to know that management is really looking for a partner, not somebody to run the company,” Nestor says.
For example, the private equity firm will test your understanding of your market, your awareness of growth opportunities and your plans for the future, because leaders who are just looking for “dumb money” don’t often set strong visions.
Your potential partners will also be watching how freely you share information about your company or whether you’re holding back, which can help them predict how your relationship together might go.
“There are some management teams, which basically tell you everything about their business,” Nestor says. “They’re not holding information back. That tells me, if they’re very open, that they’re going to be open after the deal closes. They don’t view giving us information as threatening. That’s one of the ways we can tell whether we’re going to philosophically be on the same page.”
Private equity firms are in business to build the value of their investment, and they want the companies they’ve invested in to be willing to take direction and grow. So to meet that need, you must learn to bare your financial secrets and ask for their help.
It’s a big step to collaborate with a partner when you’re used to working alone, and it’s even bigger when you’re being asked to divulge private information. So look for a private equity firm that can provide tools and suggest resources to help ease your transition.
Kirtland, for example, holds an annual CEO/CFO conference for its portfolio companies. In addition to offering expert speakers, the event also introduces the management teams of its various companies to one another, multiplying each leader’s access to a pool of advice.
By taking the time to find the right firm to partner with, you can stave off some of the stress of selling, allowing you to focus on your business and getting a full night’s sleep in the process.
How to reach: Kirtland Capital Partners, (216) 593-0100 or www.kirtlandcapital.com
A balancing act
Michael DeGrandis wants to know everything about your company. But don’t let that make you uncomfortable — it’s for your own benefit.
“If we’re going to own this, we want to understand where we can add value and how we can help support management,” says the chief financial officer and managing partner at private equity firm Kirtland Capital Partners.
When partnering with a firm, the more you open up, the more it can help you manage your time when you’re trying to juggle business-as-usual with the struggles of selling to a private equity firm or being sold by one.
“There’s this fine balance with your senior management team that you want, where they continue to maintain the performance in the business, and yet, at the same time throughout the sale process, keep your interested parties in the game by addressing their questions and concerns,” DeGrandis says.
For example, you may want to split your management team between the two tasks of running the business and working on the sale. And your partners can also step in to supplement your abilities. DeGrandis, for example, often prepares and presents information to interested buyers so that CFOs can focus on their everyday tasks.
And, of course, the better your partners know your business, the better equipped they’ll be to adapt as necessary.
“That shared vision can change over time,” Nestor says. “As we entered a more challenging economic time, we had to change our priorities. You’re constantly evaluating that shared vision and what’s best for the business.”