Initially, „private equity“ was a synonym for venture capital. In other words, private investors risked their money for investments banks faced reluctantly, dismissively or in certain cases with extremely high interest rates. Start-ups and medium-sized businesses benefited from this situation. However, this situation has underwent a radical change.

Private equity firms show up primarily as interested party in investments, where they assume hidden assets or other short-term viable values, most of all intellectual property, economies and opportunities to rationalize. Or if they could presume a high yield or make additional profits reselling after a short time. Surely, here and there such investments might be of interest for a partner, despite such a business strategy, but only here and there.

Contrary to the general opinion that business is only a short term affair in our fast moving times and one should not plan for the long run, on closer inspection we observe that even in the 21st century, businesses need time to develop so they can become strong and successful. Businesses need perspectives, developed structures, assets and resources that allow for surviving the ups and downs of the market during tough times of competition. Businesses have to be allowed to generate knowledge and experience. Much of this cannot be bought at will. Most of all, businesses need ownership structures which allow for doing without profits for a certain amount of time, for instance because investments into new markets seem seminal.

Basically, private equity firms are short-term thinking institutional money managers who can only generate capital if they can use their source of capital from the beginning of the investment for a high rate of return. This is comprehensible and from the investors point of view justifiable. However, it is not always in the best interest of the business, which this capital should flow to.

We suggest when picking a potentially suitable investor to be reserved when associating with private equity firms. Discussions only make sense, if the goals of the investors give consideration to all facets of a business; if they possess a timeline and guarantee the preservation of intrinsic values, especially for qualified human resource potential and if there is willingness to take entrepreneurial risks.

For us, ‘first choice’ is always an investor with industry-specific expertise on the market, an investor, who is active in this market and whose engagement in view of the market turns ‘1 + 1’ into more than just 2. In other words, we prefer in the development of M & A strategies potential partners who strengthen the market position of a business.