Choosing between a minority and a majority investment
This article is for private equity firm BGF
If you've decided to seek equity finance for your company, you'll need to decide whether to go for a minority or majority investment. Both funding types have advantages, but the best option for you will be determined by your business ambitions. What you intend to spend the funds for, your long-term corporate goals, your personal aspirations, and how you want the leadership structure to look are all important considerations. It's critical to take your time and think about the best alternative.
Minority investment
A minority investor provides cash in exchange for an interest in your company of less than half. A minority investor is a non-controlling partner by definition. This usually means that crucial decisions are kept in the hands of the existing founders or management team. BGF invests in businesses to help them expand, and we believe that minority investment is the most effective method to do so since it empowers management teams to chart their own course to success.
Minority growth funding
Minority growth capital is specifically designed to help a company grow. The majority of the money will go straight to the company's balance sheet to help it develop. Investing in more assets (e.g., real estate or stock), expanding operationally (e.g., hiring more people or expanding into new regions), implementing an M&A buy-and-build plan, or inventing new goods are all common growth methods.
Minority expansion capital may be appropriate for you if you meet the following criteria:
- You have big ideas for the future of the company, and you'll need money to make them happen.
- You want to grow your company without going into debt.
- You want a non-controlling investing partner who will not be able to make important decisions for you.
- You want to keep control over when and how you depart your firm, whether it's through a sale to another company, an investor, or a stock exchange listing.
Majority investment
An investor who buys more than half of a company in exchange for funding is known as a majority investor. Majority shareholders are frequently the controlling shareholders.
They may be able to exert control over the company's finances or operations, perhaps overruling the management team's opinions in circumstances where they are misaligned, or they may be perfectly aligned.
As part of the arrangement, a majority investor may agree to protect a firm owner's vote rights or vetoes on particular subjects. It all relies on the terms of the deal, which is why you should get legal guidance before handing over a piece of your company.
A majority investment could be the right choice for your business if:
- You'll need a higher sum of money than a minority investor can give.
- You want to reduce your engagement in the company over the next few years and are willing to hand up management of crucial decisions to someone else.
- You want to take a step back from the company while still owning a minority stake in order to profit from a future sale.
BGF’s minority funding model empowers business owners to scale up quickly
BGF is dedicated to providing minority capital to a variety of businesses, including early-stage, scale-up, and publicly traded companies. We support entrepreneurs who want to maintain control of their firms while they develop as the world's most active growth investor. We invest with commitment and give business owners the tools they need to achieve their growth objectives the manner they want.
With 16 investment teams spread across the UK and Ireland, we operate a fully regionalised investment methodology. BGF's local investors are close by to help you realize your goals, no matter where your company is located. We normally provide initial capital of £1-15 million, with the possibility of large follow-on funding.
In addition to money, BGF investee companies have access to our Talent Network, which includes over 6,000 board-level non-executives.
Hundreds of portfolio companies have been exposed to their non-executive chairmen and directors through our Talent Network.
Expertise on Demand is a service provided by the Talent Network that connects organizations with experts on an interim or consulting basis. This service has aided a number of portfolio companies with special initiatives or issues.
Our track record bears witness to this. Over £2.5 billion has been invested in over 400 businesses in the UK and Ireland, with over 100 of our portfolio companies achieving exits. Rather than being dictated by us, the management teams chose the timelines for these exits. We do not impose drag rights on our customers.
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