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5 things to look for in a private-equity partner

Speakers at yesterday’s Restaurant Finance Summit stressed that a restaurant company should be as careful about selecting the right private-equity investor as the funding firms are in choosing where to put their money.

“At the end of the day, you’re going to married or partnered. Are they people who you really want to be partnered with, because there will be bumps in the road,” commented Russ Bendel, CEO of The Habit.  The burger chain decided to align with KarpReilly in 2007 in part because Bendel had worked with the investor while he headed Mimi’s Grill and the relationship had been favorable to all.

Here are five recommendations he and other speakers had for finding the right private-equity partner.

  1. “You’re looking in a private equity partner for something more than just money,” said Bendel. Do they bring strategic value, like knowhow on how to build an infrastructure or knowledge of the market? Do they have the resources for technology or research?
  2. One of those values should be knowing how to recapitalize the business again, be it through an IPO, a sale to another private-equity company or a strategic acquisition.
  3. Bendel advised restaurateurs to ask themselves, “Do they understand the restaurant market?” Have they done deals in the industry before?
  4. Similarly, he said, “what is their history of success with founders?”
  5. Do both parties share a similar plan and seem willing to be flexible?

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