Four Rules for Winning Private Equity Investment
With traditional financing drying up, private equity financing is becoming ever more critical. Here are 4 ways juniors can make their project more appealing to private equity investors.
Junior miners often ask me what they can do to win private equity investments. With traditional financing drying up, private equity financing is becoming ever more critical.
From meeting and talking to hundreds of private equity investors, I have come up with four rules.
Rule 1: Have a good 'elevator' pitch
Every year the average private equity firm receives hone calls and emails from 500 different mining companies pitching for money. Of these, it might whittle the list down to 50, or so, mining companies which they are willing to meet. And from that there will be only, perhaps, a couple of projects in which it will invest. You therefore have to get your business case across succinctly.
When I met up withCaroline Donally, Managing Director, Denham Capital she articulated what she was looking for.
“I like an elevator pitch which has been prepared and planned. In five minutes, I want a management team to tell me why I should invest in them”.
Rule: 2: Have a good management team with an established tracked record
With apologies to geologists, as a rule of thumb, private equity investors will often look at management teams first, then the assets. You can change the people, but you can’t change the geology. As Caroline goes on to say:
“For me it’s always people first, then assets. Within that I want to hear about their teams’ skills and expertise and more critically, how those skills are related to the asset.”
Rule 3: Have skin in the game
Private equity investors look at mining management teams who put money where their mouth is, according to Marcel De Groot, Founder and President, Pathway Capital. Marcel, who is speaking at Mines and Money London, says:
“It's critical management has made a meaningful investment into the company (aligning interests with shareholders), and are focused solely on running that company as you don’t want to be orphaned if they have success elsewhere.”
Rule 4: Recognise the opportunity of ESG
Finally, juniors must recognise that the investor priorities of private equity firms are changing; they are become increasing aware of the new ESG investment landscape.
Partly due to the demands of their LPs, but also because they increasingly recognise that is good for the industry as a whole, private equity firms are increasingly looking at the ESG credentials of miners before they invest. ESG isn’t just for the largest 30 mining companies says Matt Fifield, Managing Partner, Pacific Road Capital (whose presentation at Mines and Money London will look at “An untapped opportunity - Why junior producers and explorers need to understand the impact of ESG investing”).
Mines and Money London has over 50 private equity investors already signed up to attend, all looking for projects to invest: They include:
- Guy De Freitas, Principal, Appian Capital Advisory
- Bert Koth, Managing Director, Denham Capital
- Owen Hegarty, Chairman, EMR Capital
- Pim Kalisvaaert, Portfolio Manager, Hawkes Point Capital
- Mike Barton, Portfolio Manager, Orion Mine Finance
- Matt Fifield, Managing Partner, Pacific Road Capital
- Marcel De Groot, Founder and President, Pathway Capital
- Aline Carnizelo, Portfolio Manager, Pala Investments
- Ross Bhappu, Partner, Head of Private Equity Funds, Resource Capital Funds
- Peter Ruxton, Principal, Tembo Capital
Do you agree with my four rules? What’s been your experience of winning private equity investment? Tell us in the comments section below.