The famous Barbarians at the Gate story, about the leveraged buyout of RJR Nabisco by KKR, may date back nearly 30 years. But perceptions of an aggressive takeover culture still linger around private equity.

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For many casual observers, discussions of the sector still conjure images of faceless investors trampling over hardworking businesspeople, before slicing up and hollowing out their companies. Even today, these stories can influence founders, causing them to avoid private equity as a possible route to growth.

Accepting external capital is a huge decision for a founder who has built a business through single-minded commitment and determination. Most founding teams reach a point where they know they need external funds and support to take the business to the next level, but they are concerned about losing control. Do they really want to invite the barbarians into their boardroom?  

Thankfully for business owners, private equity has come a long way since the 1980s.  

In the current market, slow growth and high interest rates mean investors can no longer create value through aggressive tactics and financial engineering. Meanwhile, the sheer number of private equity firms today means competition for the best deals is fierce, pushing valuations even higher and giving founders far greater choice over who they work with.  

Today, investors must work smarter by partnering and collaborating with founders and management to ensure everybody wins. Here’s how that should look in practice.  

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Founders lead, investors support  

Founders know best how to run their company. They have built a business that works through their sector knowledge, intuition, and hard work. The investor’s role is to help them steer it in the right direction through strategic advice, support, and access to their valuable network.  

Investors are experts on maximising key growth levers such as expanding sales, international expansion, M&A, and customer success. They can introduce founders to valuable contacts to help push these strategies forward and dig into business data to help identify opportunities they might otherwise miss.  

What they should not do is make the decisions. The founder should remain in the forefront, having the final say and drawing upon the investor’s resources and expertise to ease the path to scaling. 

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Simplifying the capital structure  

Overly complex capital structures can be a huge distraction, particularly if founders have taken initial funding from friends or family and feel under extra pressure to make returns quickly or heed their advice on every decision.

Founders are also often concerned that a complex cap table may impact their attractiveness or valuation when considering private equity investment.  

In fact, many investors today will work with founders to clean up their shareholder base, bringing clarity and simplicity to the capital structure so that they can focus on what they do best: building their product and growing their business.

Founders can prepare the ground by getting agreements with early investors on blocking rights and understanding their expectations over future investment and exit scenarios. This minimises the stress on all sides.  

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Encouraging calculated risks

It’s common for founders to become more risk averse as their business matures and the stakes increase. But businesses stagnate without risk and will ultimately slide into mediocrity if they stick to business as usual.

This is where investors can be hugely valuable by taking the financial weight off the founder’s shoulders while providing the expertise they need to take the calculated risks most likely to drive growth.

The key is to take between four and seven bets over the course of the hold period, such as new product launches, AI integrations, or expanding into new regions. These should not be so big that they could put the future of the company at risk, but big enough that if they do pay off, it will create huge equity value. Only one or two need to work for the investment to be worth it.

Scenario planning ensures everybody is clear on size of bet, what success looks like, and how different eventualities would be handled. There should also be clear KPIs of what success should look like in three to six months, and an agreement on what happens if those targets aren’t hit, to avoid continuing blindly with no return.

We always advise having at least one board member plus an internal team member committed to new initiatives, ensuring the resources and strategic oversight are in place to give maximum chance of success.  

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Financially healthy international expansion

International expansion done wrong can be expensive, not only in terms of the financial investment but also the opportunity cost and long-term implications, which can impact further expansion plans, valuations and business attractiveness.

The right investment partner will ensure businesses avoid this by helping with the commercial diligence involved. This can be vital in ensuring the business builds a deep understanding of market differences, to decide whether the product or marketing need to be adapted for a new audience.  

Investors can also advise on how best to set up local offices for success. For example, we always say they have at least five employees working closely together and in regular contact with the headquarters, to ensure the culture is retained. Employees who are culture carriers for the business, and who have proven they can succeed, are also a huge asset in this scenario.

Finally, it’s important to be clear what success looks like across key metrics, including developing the pipeline, request for proposals (RFPs), and sales, ensuring regular reporting at board level, so lessons can be learned, and opportunities maximised as quickly as possible, in partnership with investors.

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Bringing M&A expertise 

Most founders do not have experience getting deals over the line — and that’s OK. Investors have been through the M&A process many times, bringing the expertise to help founders navigate the unknowns without forcing any decisions they’re uncomfortable with.  

Successful M&A comes from being clear what success looks like, having a clear strategy and plan to follow and track against, and understanding the potential challenges and benefits.  

For example, if the strategy is to acquire a company’s customer base, how many will realistically migrate, and what customisation will they require? If you’re looking to acquire a product, how easy will integration and cross-selling be? Or, if geographical expansion is the goal, what are the cultural challenges, and how can these be mitigated?

Investors are there to guide founders through all these challenges, as well as advising on the talent and leadership demands involved in pursuing M&A successfully. That includes having clear lines of responsibility for the integration, spanning board oversight, an integration lead, plus representatives from finance and HR.

Founders should also prepare for M&A by ensuring their core financials are clear and well understood. Post-deal, they need to be able to track the impact of the acquired companies, which means splitting their finances from the core business. Finally, don’t overestimate the revenue synergies of a deal — cost synergies are always more real.

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Aligning financial incentives to support long-term growth

There is a quote from Charlie Munger, Warren Buffett’s longtime business partner: “Show me the incentive, and I’ll show you the outcome.” This captures the point perfectly. Both investors and founders must have sufficient incentive to make a deal work, otherwise nobody will get what they want.

Rather than rushing into a transaction, founders need to think through why they are doing it. Is it just capital? Do they want to de-risk their family, cover school fees, or pay off their mortgage? Or is it all about creating the best product in the market? At the same time, founders must understand the motivations and plans of the investor.

A big part of making all this happen is having the right conversations early on. Good investors make sure they are aligned on the vision and goals for the business before they finalise an investment.

That means not just putting money on the table but building a plan that makes sense for both parties and a partnership that works from day one.

Without this, there will come a point where this lack of alignment emerges as senior team conflict, which could put the future of the business at risk.  

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Empowering founders, not controlling them

Smart investment today is about empowering founders, not controlling them. They know their business better than anyone, and private equity’s job is to support their vision, not replace it.

By offering strategic guidance, simplifying the finances, helping with talent acquisition, and navigating complex processes like M&A, they allow founders to stay focused on what really matters: leading the company.

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John Messer is managing partner at PE firm Copilot Capital

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