Private equiteers often boast that irrespective of their percentage ownership in a business, their shareholder terms are so tight that they act as a proxy to majority control anyway. This may be true for certain terms, but it’s important to note that the type of control a private equity firm wants is the control that limits their losses when disaster strikes (or that may lead to disaster). It’s not so much control over the daily operations of the business or the growth initiatives that management drive.

Many private equity firms join syndicates to invest in larger businesses, but that has its own issues. I find that syndicates are difficult to manage, especially when all firms are looking to add real strategic value to the business. Some argue that two heads (firms) are better than one, but others argue that syndicates create often-unavoidable conflicts.

Either way, firms like to own enough shares to make their investment influential, even if their shareholder terms are restrictive. I can only speak for the firms I’ve worked with and dealt with, but this is typically at least 15-20% of the firm. Having majority control (i.e. 50%+) is more a myth than anything, except for firms dealing with special situations (e.g. turnarounds).