Private equity funds are searching for quality mid-market investments

While fundraising activity slowed in 2023, the European private equity and venture capital industry still has approximately £300 billion in dry powder to invest. What are the most important factors investors look for in a high-quality investment?

• Growth and path to profitability
• Robust financials
• Strong business plan
• Capable management team
• Compelling ESG strategy

Growth and Path to Profitability - Both growth and profitability are important metrics. There is a heavier weighting on profitability in today’s market. Thus, it is important for companies to demonstrate a clear path to profitability rather than seemingly exponential revenue growth and zero profits in sight. In the current environment, investors are wary of funding losses.

Robust Financials - Historical financial statements as well as projections must be up to scratch. Financial models should include sufficient granularity.

Strong Business Plan - Projections must be backed up by a clear plan of how forecasts will be realised, supported by market research, analysis on competitors, and sales pipelines.

Capable Management Team - Investors look for solid management teams that display a strong track record, a deep understanding of the sector, passion, and a clear strategy for the business.

Compelling ESG Strategy - Investors are increasingly considering the sustainable and ethical impacts of businesses. Clear environmental, social, and governance strategies are non-financial factors which may impact a company's attractiveness.