Private Equity investment opportunities

Private equity is an alternative asset class in which capital is invested in private companies and the investor takes an equity interest. Private companies are not publicly traded or listed on a stock exchange. The invested capital comes primarily from institutional and professional investors that either invest directly in the companies, or through a specialist investment manager via a dedicated private equity fund, who sources, diligences, and transacts the investments on behalf of their investors.

Having been largely the preserve of institutional capital until recent years private equity has now become an increasingly popular investment option for more investors as many barriers have been removed enabling alternatives, like private equity, to more easily make up an allocation of a well-diversified and robust investment portfolio.

A key distinction between private equity and more traditional assets is that private equity investments are in shares of companies that aren’t traded on public stock exchanges and so are generally illiquid, whereas publicly traded stocks can be more easily bought and sold on exchanges. This means that private equity assets tend to have a longer holding period as managers are in the position where they can be patient and wait for the right conditions before exploring an exit opportunity.

That said, a key attraction of private equity investments is that they come with the potential for higher, risk adjusted returns than investments in quoted companies, as they offer the chance to invest earlier in a company’s development and participate in the period of potentially fastest growth. In addition, as the companies are unlisted, they are not under pressure to perform to market analysts’ expectations and can therefore focus on the execution of their plan for the business. Their valuation is also not impacted by general market movements, exogenous to the underlying business.

Private equity is now widely recognised as an established asset class with a long history of generating positive returns for investors. It can be an attractive option for investors and advisers either for the potential returns or its merits as part of a portfolio diversification strategy.

Entrepreneurial private companies are the engine-room of the economy. The private equity industry is the largest and most dynamic in Europe, turning innovative ideas into successful businesses. It also helps mature companies become more productive which can in turn help drive increased investor returns.

Traditional Venture Capital will often focus on start-up or early stage businesses. However, Dalton Steiner’s experience and nationwide introducer base allows it to target later-stage, more established private companies where investor returns have traditionally been more predictable. These are typically ambitious and nimble businesses led by talented and hard working people, who can demonstrate a blend of vision and business flair, alongside a differentiated and competitive business proposition.

In all cases, the senior leaders of a PE backed business will be highly incentivised through their personal equity stake, meaning there is direct alignment of interests with the underlying investors. This is a key reason why the private equity industry has delivered superior investor returns over many years.

The minimum commitment is €25,000 per transaction, with the option to increase the amount above that level subject to availability. Many of our investors commit much larger sums, depending on personal circumstances.

Dalton Steiner's long term track record in private equity is based on a tried and tested approach of investing in only a select number of companies every year. In each case we look for a business led by good people, with an achievable growth plan, investing where we can see the potential to make an earnings-based ‘arbitrage gain’ at exit.

We choose to work only with companies which offer the potential to generate positive shareholder returns at exit, and where we are able to create significant additional equity value. We will then typically target a multiple of money (MoM) return of not less than 2.5x initial investment over a holding period of between three and five years, from a combination of income and capital proceeds at exit. Investments will generally be in businesses operating in the sectors we understand, specifically where we have a proven track record of delivering results for Dalton Steiner investors.

Dalton Steiner uses its embedded presence in the key corporate finance regions to access a range of investments and opportunities in private companies with significant potential for growth. These are often introduced on an off-market basis, on the strength of longstanding personal relationships. They could also be introduced by professional advisers who are aware of our expertise and ability to work constructively with an entrepreneurial management team to accelerate business growth.

A prospective new transaction is subject to rigorous analysis within Dalton Steiner, including a detailed review by members of our partner group and senior investment executive. That process is intended to challenge and prove the investment thesis, and to structure the transaction in such a way to achieve the best possible returns.

If the decision is taken to conditionally proceed, the target business is subject to extensive third-party due diligence. This will cover all key aspects of the investment, including financial, legal and management referencing, as well as full market and commercial analysis. At this time Dalton Steiner also seeks to identify prospective future acquirers for the business or asset, based on comparable M&A activity in the sector.

A detailed investment proposal is issued to Investor Partners only when the initial review process is complete, including an estimate of the likely projected returns. There is then a defined period to consider each proposal before deciding whether to participate.

While Investor Partners will usually make an investment decision based on the proposal document, Dalton Steiner investment executives are on hand to provide further information and discuss the merits of the investment case on a one to one basis if required.

Investing at the right price - We invest only where a competitive entry price is available and where we see the future potential to exit at an enhanced multiple of higher earnings. Dalton Steiner also seeks to identify potential future buyers of each target business prior to completing the initial investment.

Adding value - During a typical holding period of three to five years for each investment, Dalton Steiner’s executives work closely with the management to add shareholder value. The focus is on working together to drive business improvements, which in turn will positively impact profitability. This will ultimately make the business more valuable and attractive to potential acquirers.

Developing an exit strategy - From the outset of each investment, we harness our extensive knowledge across multiple sectors and the advisory community to help management develop an agreed exit strategy. We have long standing relationships with larger private equity firms, which are often looking for the ‘rising stars’ in the lower mid-market. These will often pay more than comparable trade acquirers if they can use the business as a platform for further growth or an acquisition led buy and build strategy.

Optimising value - When the decision is made to sell a business, Dalton Steiner can assist each management team in selecting the right adviser. This is often a sector specialist, whose expertise and insight can help to optimise the exit value achieved by targeting the correct buyer pool.

There are no costs to becoming a Dalton Steiner client. Fees are only payable on the sum invested. Due to FINMA regulations, we will need to verify that you are an approved investor before we can share any details of any private equity opportunities