David Jones bidder backs out – five ways to spot a dodgy private equity deal
Tuesday, July 3, 2012/
The controversy over the takeover offer aimed at David Jones has passed, with the dubious EB Private Equity now withdrawing its bid.
The company says it just can’t handle the type of attention caused by the bid – a $1.6 billion offer for the entire business.
It was easy to see the signs when the bid came to light last week: a sparse site with no sign of any details about the bidder. But it certainly captured the attention of the business community for a few days – a small success of sorts.
Businesses may receive takeover offers from time to time; it’s just part of doing business. But there are plenty of entrepreneurs who may not recognise the signs, and think a dodgy deal is actually a pretty attractive one.
Using EB Private Equity as an example, here are five things you should watch for should you ever receive a private equity bid. Be careful – scammers will try to get personal details off you to steal your money. Here’s how you can stay vigilant:
1. Check out the website
One of the first warning signs EB Private Equity was lacking legitimacy was its website. Just a quick glance reveals the company doesn’t have much to offer. It is bare bones, with no mention of any staff, clients, portfolio details, or even any contact details apart from a submission form.
There’s nothing wrong with having a simple website, but that website needs to have adequate detail for people and businesses to take you seriously.
2. Google is your friend
For one thing, nowhere on the EB Private Equity site does it actually mention the name “John Edgar”, the person behind EB Private Equity. That’s a bad sign, but not necessarily a deal-breaker. However, further Google searches turn up nothing else. If you’re dealing with a serial investor then you should expect to find more information about him or her on the internet, but there’s not a lot to be found about “John Edgar”.
Sparse information should definitely get you worried.
3. Get them on the phone
Several reports indicate Edgar didn’t call David Jones, only communicating with the company by email. It should be obvious why this isn’t a good move – no one will take you seriously, and it appears David Jones didn’t either. If you’re receiving any sort of bid for your company, then you actually need to speak to the person involved on the phone, or at least over a VoIP or video conferencing service like Skype.
Refusing to get in contact with a company is bad news, and for any business receiving an offer, it’s a very bad sign.
4. Talk to the advisors
Any private equity company will be working with a number of banks or legal advisors. And if they’re honest, they’ll tell you straight away who they’re working with. If they don’t, that’s a bad sign. And if they do, you should do your own due diligence and do a search on them to find out if they’re legitimate – or if they actually exist in the first place.
5. Look up the office
You would expect a private equity company with a supposed $200 million under management to have a legitimate headquarters. Yet EB Private Equity was said to be situated next to a couple of shops in the backstreets of Newcastle, England – hardly the spot you would expect for such a company. That’s not to say a company can’t have an unusual place to call home but, at the very least, you’d expect a sign on the door or a picture on the website.