A commitment to research and development (R&D) is an important but sometimes overlooked factor for businesses keen on attracting external investment or selling their business.
Minimising investment risk and maximising returns
When determining what business they are going to invest in, private equity investors typically look at a number of key areas including strength of proposition, quality of an executive team, strategic growth plans, financial performance and cost control management.
Investors need reassurance that an investment target is heading in the right direction. A track record of investment in R&D demonstrates the level of innovation within the company, which in turn gives investors a degree of comfort with regard to the competitiveness and the longevity of the business.
Private equity investors also need reassurance that all risks are covered. A company with a track record of investing in innovation and claiming R&D tax relief through a reputable adviser can give the investor confidence in the company’s future competitiveness and a greater level of assurance that there is no hidden liability as a result of inaccurate claims on the part of the investment target.
This approach can deliver additional benefits, for the company, at the pre-investment stage. An on-going investment in R&D focused activities can be an indicator of hidden IP which will not only improve their ability to attract investors but could also increase the valuation of a business and improve its pre-investment terms.
Article originally published on Pro-Manchester
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