The Dating Game

By Tom Matthews

It’s that time of year, when romance reigns supreme. With Valentine’s Day rapidly approaching, it has got me thinking how investing in private businesses is a lot like dating.

As investors, we screen lots of potential targets looking for that special partner to build a shared future together. Once we have identified an attractive suitor there is then a process of getting to know each other. And, if we are lucky, the relationship will blossom into a long and lasting marriage.

Swipe left or swipe right (screening)

Like dating, knowing what you want from a potential partner and screening out unsuitable candidates early are key. As investors, we are very strict in terms of what we look for in a potential partner. We don’t deviate from our key investment criteria and sector focus. If an opportunity does not fit, then we don’t waste our time trying to fit a square peg into a round hole.

The first date (getting to know each other)

So you’ve identified an attractive potential partner, plucked up the courage to ask them out. You’ve booked a flashy restaurant and ordered an expensive bottle of wine. As the evening goes on, you are both trying to work out whether you are right for each other.

Often in private equity, like dating, even though they might be right for you, you might not be right for them. The timing might not be right. They may be being courted by other potential suitors who have promised them the world. They may have had their fingers burnt from past relationships. Working through these key human issues is essential.

The courting process (due diligence)

Of course the deal needs to work financially for all parties and the numbers need to stack up to support the valuation. But rather than just focusing on the past, we spend time planning for the future. Ensuring that our potential partners share the same cultural values and vision for where the relationship is heading is fundamental.

It’s also got to be fun. A successful and lasting marriage (just like a partnership with a private equity investor) is a long term commitment. Having fun together and enjoying each other’s company helps relieve the tension during challenging periods.

Marriage (the legal bit and the celebration)

Signing the legal paperwork. Proposing toasts. Making speeches. Enjoying the party. Whether it’s a wedding or the night of a deal completion, this is just the start of the journey together. It’s going to take a lot of hard work but it can be a life-enriching experience.