If you’re a business owner who is in need of investor cash but does not want to sell a majority share of your firm, you have lots of company.
Consider the Minneapolis seafood restaurant Oceanaire, which in 2004 began fishing for money to help it grow. The catch—a $20 million equity investment from New York–based Clarion Capital Partners, LLC—allowed the restaurant to nearly double the number of cities it serves. “When we did their refinancing, they were in five markets,” says Peter Bennett, a managing director in New York for Goldsmith Agio Helms, the Minneapolis-based investment banking firm that arranged the match. “Now they’re in nine.”
Best of all—from Oceanaire’s point of view—that $20 million investment represents a minority stake. The business was able to attract and secure financing without giving up either financial or operational control.
There are a lot of private equity groups seeking high-quality deals, and there are not a lot of high-quality deals. If you own a strong business, you’re in the catbird seat. People will be knocking on your door.
Money and control are an important combination to a lot of business owners. Fortunately for them, this is a relatively easy time to find minority equity investments. “It’s a strong market today,” says Bill Cavanagh, a partner at Edina-based Counsel Funding Partners, an investment bank and management consulting firm. “There are a lot of private equity groups seeking high-quality deals, and there are not a lot of high-quality deals. If you own a strong business, you’re in the catbird seat. People will be knocking on your door.”
Successful businesses typically look for equity financing after they’ve exhausted their own resources, loans or investments from friends and family, and bank loans. Some business owners might seek investment money in order to expand the business. Others want to acquire a second business and work to synergize the two. Still others want to buy out an existing investor—perhaps a friend or family member—or get the majority owner, who typically has a great proportion of his or her personal wealth tied up in the business, some liquidity. “It allows a business owner to diversify wealth,” Bennett says.
