5 Best Practices for Making the Most of Your Tech-PE Partnership

April 2019

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By Aftab Jamil and Scott Hendon

For high growth tech companies looking to scale quickly and sustainably, partnering with a private equity (PE) firm is often a good option. In addition to infusing companies with critical capital, PE firms can also provide them with the market access, mentorship, operational expertise and tools they need to drive greater revenue and business growth. In addition, they can help shoulder the burden (including the expenses and risks) of growing a business—a formidable task tech executives often underestimate.

Nevertheless, partnership success is not guaranteed without significant effort and investment from both sides. Good partnerships require proactive management, ongoing communication and a clear alignment of goals between both parties. Great partnerships demand an additional level of mutual trust, accountability and respect.

There are also many risks involved. Before undergoing a PE transaction, most, if not all, tech executives have already calculated and acknowledged the significant risks they would be taking when entering the deal—including likely giving up a controlling interest in their company. Nevertheless, “acknowledging” a risk is often very different from actually “comprehending” its full effect once the definitive agreements are signed and the partnership begins. While a company’s executive team may have been aware of these compromises before, learning how to cede a certain amount of management control to their PE partners may still be difficult. Learning how to articulate and constantly re-define what constitutes “value” throughout the partnership duration—whether it’s scaling the business long-term or simply turning a profit—will remain critical for both parties.

So, how can tech companies optimize their relationship with their PE partners and ensure the goals of both sides are being met?

 

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