If one saying tells us that a small home is better than a large one at someone else's, another asserts that unity is strength.
It appears that in the realm of entrepreneurship and finance, the topic of the necessity, opportunity, or obligation to « bring a financier into the capital » also encounters these two seemingly contradictory approaches.
Let's try to summarize and synthesize the factors that lead a shareholder, often a majority shareholder and a leader, to choose (or not) to bring in an investor described as a "financier" into the capital of "its" SME.
Through a few simple questions, we will try to understand, even if we already have a sense that it all comes down to will, pragmatism, and compromise.
Indeed, the participation of a financier is a matter of strategic consideration because the operation itself modifies, and significantly, the essential parameters of the company.
Several scenarios call for studying the entry of financiers :
The aim is to diversify one's ownership and thus avoid being diluted by a single player. By favoring common interests other than those of an industrial, for example, the founder will often find a more suitable governance structure.
The operation involves a thorough understanding of potential drawbacks and consequences of such an operation and to inquire about the precautions to be taken. The topics are numerous, and the stakes are high on important aspects such as :
Finally, and to be concrete, the arrival of the financier, precisely because he is not the best expert of the company's business, will require the entrepreneur to accept the constraints of transparent communication among shareholders and to benefit from it for himself and his internal organization. As we have understood, this involves reporting, often negatively anticipated, but which greatly contributes to the mutual understanding of the two types of shareholders.
Moreover, once the technical and administrative issues are resolved, it becomes apparent that being accountable to others also leads to a better understanding of the organization that one must "manage". The financier, seeking analytical and reflective elements (rather than control), will also oblige leaders to provide "good" reasoned answers, engaging in recurring questioning. And not only on financial matters: the new non-specialist shareholder will "love," contrary to what one might think, to inquire about economic issues (products, markets, innovation, competition...), organization, and HR in particular, as he understands well that the key functions of the company are not primarily, except in exceptional cases, those of finance.
Indeed, after the thinking phase, the decision and action phase naturally follows, where everyone becomes aware of the complexity of the operation.
As we have seen, the choice is of a structural nature and commits the parties involved over a long period.
The thought process in early preparation is essential and should be supported by a specialized team.
Necessity being the law, it is important to surround oneself with the right team and make decisions based on well-informed reflections and shared analyses.
Then naturally comes the necessary stage of searching for and choosing the financier who is likely – a challenge in itself – to "tick all the right boxes." This phase is preceded by the drafting of a memorandum containing a business plan that will be sent to a panel of stakeholders whose corporate purpose and investment strategy are compatible with the size, industry, and the operation itself.
Other important steps include meetings that can reinforce mutual interest in product-market aspects as well as the willingness to work together on this stage necessary to complete the project.
MBA Capital's involvement, in synergy with the company's advisors and shareholders, will occur at every stage of the process, whether it's the initial planning, investor search, or managing the key stages of the process. This includes, of course, analyzing financial and legal proposals right up to the closing itself.
To put in a nutshell, there are multiple ways to succeed and achieve your objectives, especially when it comes to business development. Opening up your capital to financiers is one approach, and it may even become an objective in itself.
It's a means because the incoming financier brings long-term financing, an external perspective, and their network. This naturally adds strength and confidence. An outsider is generally assumed to have the ability and power to provide funding and can also persuade the company's bankers to say "yes" (to borrow an old slogan from one of them).
Internally, the financier remains a structuring actor who requires communication and sometimes accountability. They are often an actor capable of retaining and attracting new talents because they ensure the sustainability and innovation in the company's development and value creation strategy as shareholders.
Entering the capital by the financier is not an obligation, and unless in exceptional cases, not a necessary harm; it is a means and an opportunity.
Capable of helping to achieve stages of development and innovation within a relatively short timeframe, the financier ultimately becomes an economic actor and, as a partner, contributes to value creation.
Updated on June 9, 2023
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