Some of the challenges faced in fund raising in the food & drink sector were discussed at the Brodies Food & Drink virtual conference 2020 by Andrew Keeble (Co-Founder, Heck) and Graham Whittle (Founder, Whitby Seafoods). Their experience shows that an alternative to bank funding that may provide a much needed cash injection is a private equity investment.
What is private equity?
"Private Equity" is used to describe various kinds of funds that collate money from groups of investors in order to acquire an equity interest in a company. This can range from moderate amounts to multi million funds. Depending upon the needs and direction of your company, raising investment through private equity can not only help plug an investment gap but also provide your company with expertise gained from investing in numerous companies, often across a variety of sectors.
Recognition of Brand Value
Private equity firms are placing an ever increasing importance and value on a potential investee company having a strong and immediately recognisable brand. This can be a particularly strong selling point within the Food & Drink sector where a company's history and providence helps to establish an immediate and valuable connection with its customers. The link between increased brand recognition and increased return on investment is investigated in a McKinsey study (“The Business Value of Design”) which reveals that the best-branded companies show twice the revenue growth and 25% higher shareholder returns than competitors.
This recognition of brand value by PE firms was discussed by Andrew Keeble and Graham Whittle who have each seen their respective brands strengthen and grow in a competitive market. A trusted and recognised brand allows the consumer to develop an emotional attachment to the brand and building brand loyalty is key to sustained growth and increased market security, all important considerations for a private equity investor.
Benefits of a Private Equity investor
Amongst a wide range of other expertise, private equity firms are often ideally placed to bring a wealth of brand expertise to an investee company and, in an ever changing fund raising climate, are very often in a position to move quickly to investment stage and deliver much needed brand support and investment.
Is Private Equity appropriate for my company?
Whether or not private equity backed investment is appropriate for your company will very much depend upon your company's specific set of circumstances and balancing the aspirations of your shareholders with the growth needs of your company. Private equity investors may look for differing levels of control at both board and shareholder level which will need to be carefully considered and how that will interact with your operational requirements.
Navigating a private equity fund raise is not without its challenges in the current climate given the importance placed on due diligence and developing relationships with the management team. That being said, PE firms' doors remain open for business and the next opportunity.
Brodies advises organisations of all sizes in relation to equity and specifically private equity investment. If you would like to discuss this further, please contact Eric Galbraith.
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