Be careful to whom you sell your company, said the founder of Jimmy Choo footwear, Tamara Mellon. In the Financial Times, Mellon was quoted, “What happens in private equity is they come in and they say we’re going to be a great partner. We want to hold this long term and we’re going to help build this brand. But the day after signing, they talked about selling the business.” This is true — often because the private equity fund structures leave the private equity investors no other options.
In retrospect, she wishes that she hadn’t sold a majority of her company to a private equity firm in 2001, even though the financial results were outstanding. In fact, her firm was sold a total of four times among private equity firms before being sold for £500m to Labelux, a private German luxury goods group in 2011.
I totally agree with Mellon. Traditional private equity funds are forced to sell their companies within a very short time window — often forcing growth and another sale, sometimes at inopportune moments. This is why I am so grateful that my investment partnership, Greybull Stewardship, has a unique fund structure that does not force an “exit strategy”. The Greybull Stewardship investment partnership does not have a mandatory fund expiration date — it can exist in perpetuity. This allows me to promise to the companies in which I invest that I will not force growth rates or exit strategies, but I will follow the lead of the owner/managers running the business.
Here is the link to the full story in the Financial Times.