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Evaluating Whether Private Equity is Right for Your Company

Looking for the right fit? Here are the differences between selling to private equity firms and Volaris

If you are a software business owner assessing options for selling your business, you may be interested in understanding the differences between types of acquirers. 

In this article, we highlight what you might expect if your company were to be acquired by a private equity firm. Then, we explain how joining Volaris is different.

The private equity time horizon

Private equity firms invest in or acquire companies that are not listed on a public stock exchange. The goal of private equity firms is to extract value from companies they acquire, in areas of the business where others may not have seen value.

Private equity firms are typically looking for shorter-term investments. On average, they hold the companies they acquire or invest in for about 4 years, but some can have a holding period of up to 7-10 years. 

The goal of private equity firms at the end of the holding period is to return cash to investors, assuming the investment has been successful. As a result, private equity firms are always looking for possible exits for the companies they hold.

Companies that are acquired by private equity firms can usually expect to be sold again to a new owner after the holding period. At this point, the company leadership and team will need to be ready to make another transition and adapt again to a new owner.

Private equity vs. the Volaris ‘buy-and-hold’ strategy

At Volaris, we don’t believe in developing exit strategies for the businesses we acquire. Instead, we maintain a "buy and hold forever" strategy. 

We are interested in making several ongoing investments in our portfolio businesses for an indefinite amount of time, rather than a short-term infusion of capital. Since we have a long investment time horizon, we have the ability to strengthen businesses and support their continued growth in a way that is not possible with buyers who are looking to exit companies.

In the 25 years that we have existed, Volaris has never sold a company. Armed with our expertise in software, we have helped companies weather difficult market conditions, supported them through legal matters, and assisted with succession planning.

Financial transparency: Private equity vs. Volaris

Since Volaris is part of the publicly-traded Constellation Software, we are required to report our financials every quarter. This is a notable difference from most private equity firms which have no such requirement to disclose financial information publicly. 

For companies that are considering joining us, a benefit for them is that our parent company’s financial track record is easily available to view, dating back several years. 

Making long-term investments in our people

As part of our goal to provide a safe, permanent home for businesses to grow, we have nurtured a collaborative ecosystem for our software leaders.

Once companies join Volaris, they become part of a community that consists of more than 100 businesses across many vertical markets in diverse corners of the world

Our business leaders connect regularly at Volaris-wide events and can always turn to their peers to help them solve challenging business problems. We share operational best practices openly among colleagues and encourage a culture of continual learning. The vibrancy of the Volaris network is especially apparent when our leaders gather for Volaris events, such as our flagship conference.

Our human resources leaders take career development seriously, and we invest in our people by developing career roadmaps for every employee.

Why some business owners chose Volaris over private equity

Software entrepreneur Chris Martin, the co-founder of Tibersoft, ultimately decided to join Volaris instead of a private equity firm after going through the following thought process:

“I knew that private equity funds typically followed a five-year ownership cycle of acquisition, growth, optimization, and resale. Since the fund was nearing its end of life, I had concerns that the ownership cycle would be accelerated.

What if there wasn’t enough time for my company to realize its potential within the fund? Would we be re-sold only to be dissolved or amalgamated into some other business? In that scenario, what would happen to all those that have chosen to follow me?”

incadea is another software company that has settled into a permanent home at Volaris, after changing ownership four times over 20 years.

The company's leaders are using their newfound position of stability to rethink incadea's business model, customer relationships, and organizational setup. Three years after their acquisition, they told us:

“There is stability and support here in our new home [at Volaris], so we can pursue our ambitions.”

– Ilya Plotnikov, CFO, incadea

Looking for more reading to inform your research?

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Learn more about Volaris 

We’ve successfully supported the growth of software businesses for more than 25 years.

We are always happy to discuss possibilities for new businesses to join us. Feel free to drop us a line!
 

About the Author

Dilys is the editorial director at Volaris Group. She has a background in business journalism, with past experience covering publicly-traded companies, M&A, C-suite executives, and business trends as a TV news producer. Do you have a topic you'd like to see Acquired Knowledge magazine cover? Send your reader suggestions to: acquired.knowledge@volarisgroup.com

Profile Photo of Dilys Chan