What do KCP look for in a business?
At Key Capital Partners we support growing businesses with annual profits of over £1m, who are looking to raise a minimum of £3m of private equity investment.
We support management buy outs, development capital and equity release transactions and are happy to provide additional capital for future acquisitions. Some of the key factors that we look for in an investment opportunity include a strong management team, a track record that the business is growing as well as a clear exit path.
A track record of business growth whilst maintaining or even increasing gross margins indicates that the business is a market leader and has a sustainable position.
We expect growth businesses to demonstrate the ability to at least double profitability over a three to five-year period. Good visibility of future revenues, whilst not a pre-requisite, enables us to better assess and obtain comfort with forecasts showing high growth.
A large and growing addressable market with limited competition will ensure there is plenty of scope for growth during our investment period and beyond without having to rely on increasing market share. Another factor that is important for us is a good spread of customers with no reliance on any specific client. In people centric businesses a good spread of business across the team is also beneficial.
We back management teams and therefore a team with a strong track record who have been responsible for the growth of the business to date is key.
We always prefer to support an incumbent management team, as is typical in management buy outs, growth capital and equity release transactions, rather than parachuting someone new into the business.
We would also want goal congruence with the management team such that both KCP and the team are focussed on maximising capital growth and delivering an exit event within three to seven years. In addition it is important that the team really wants to work with a private equity investor like KCP.
We like to build a strong and collaborative relationship through the initial investment transaction and beyond, when one of the deal team will join the board as a non-executive.
A clear exit plan is something that all investors will look for in an investment opportunity. KCP will assess the likely appetite for the business to realise an exit either through a trade sale a secondary buy out.
Our top tips for a business plan...
A business plan should include enough information for our transaction teams to assess whether the business meets our criteria, as well as covering the key factors that Key Capital Partners look for in an investment opportunity.
A good business plan should be concise and should include a clear description of what the business does as well as an organisation chart and relevant experience of the key managers.
There should also be an outline of the proposed transaction and should include the following:
- Amount of money required from an investor
- Overview of market, including company size, growth rate and trends as well as key competitors
- Growth strategy
- Summarised financial information including historic and forecast (at least 3 years). This should include profit & loss account, balance sheet and cash flow together with commentary
- A detailed, integrated, monthly model to support the forecast