This is a question we get asked quite frequently at our exit planning conferences. Because mega, billion-dollar private equity (PE) acquisitions tend to get all the attention in the business press, a good portion of middle market business owners are unaware of just how attractive their firms might be to PE groups.
Here are some recent statistics from Axial Forum:
“All things private equity remain healthy. According to PitchBook’s report on U.S. PE in the Middle Market, 654 U.S middle market private equity transactions closed in the second quarter of 2018 with a value of $87.6 billion. The middle market has seen robust activity, accounting for 60% of U.S. PE-backed deals, compared to 58% for all of 2017.”
This is fantastic news if you own a buyer-ready business and are in the market right now looking for buyers/investors. One of the most important buying groups to consider is private equity firms. Even though activity is high right now, not every lower middle market company is a viable PE target – firms are typically looking for specific targets based on industry, geography, size, market share, management depth, and more.
This is why we recommend that you hire an experienced M&A advisory firm to give you guidance about buyer targets. One trend that is driving many PE firms downstream toward smaller and smaller companies is the strategy of using “add-ons” to grow a platform.
“The middle market is still the darling of the industry, accounting for nearly 70% of all capital invested in private equity in the first half. And not surprisingly, many companies are gobbling up add-on acquisitions in today’s lower-growth environment. According to PitchBook, large platform companies scour the middle market for add-on acquisitions because its companies are large enough to move the needle, yet small enough to be digestible and potentially fly under competitors’ radars. Add-ons have accounted for 53% of middle market deals in the first half of the year.”
Axial makes an excellent point here: Because of their relatively small size, many of these add-on transactions get very little press (if any at all). You might be surprised to learn that many of your competitors are now funded by deep-pocketed equity firms with the goal of adding even more small to mid-sized firms to their larger entity.
It is always interesting when we meet with potential clients one-on-one after our conferences and present research we have collected showing active investors in their industry. Quite often they are surprised to see the names of other middle market companies they know that have PE backing.
The truly interesting news is that the stockpile of capital with private equity firms only continues to grow, according to Axial Forum:
“It doesn’t look like there will be any change to the private equity market anytime soon. Even if macro-economic conditions change, private equity firms still have a stockpile of capital ready to deploy. The strong middle market private equity fundraising environment continued in 2018, with 72 funds raising $61 billion through the first half. The $847 million average fund size in first half of 2018 currently exceeds the high-water mark of $786 million set in 2009.”
Keep in mind that limited partners provide capital to private equity firms for one reason: To invest it! Every dollar of committed capital represents funds needing to find a home and be put to work. They might be put to work in your company, helping it to reach new heights of revenue and profitability.
If you are one of the thousands of business owners who have little understanding of how private equity firms operate in the lower middle market and have no succession plans in place, you need to attend one of our complimentary exit planning conferences.
There you’ll hear about all buyer types active right now during one of the strongest seller’s markets in ages, and gain the knowledge and techniques to exit your business for maximum value.
To learn more and to find out how you can attend, please use the following links:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience at gencm.com. Here are the types of information we gather.
Information You Give Us: We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice. Our computer system protects personal information using advanced firewall technology.
Information from Other Sources: For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Capital Markets LLC may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Capital Markets, L.L.C. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Capital Markets LLC at is office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
INFORMATION ON THIS WEB SITE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSION MAY NOT APPLY TO YOU.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Capital Markets may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Capital Markets does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Capital Markets will be deemed NOT to be confidential. By sending Generational Capital Markets any information or material, you grant Generational Capital Markets an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Capital Markets is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Information Generational Capital Markets publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Capital Markets intends to announce such products, programs or services in your country. Consult a Generational Capital Markets representative for information regarding the products, programs and services which may be available to you.
Generational Capital Markets makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Capital Markets web site, please understand that it is independent from Generational Capital Markets, and that Generational Capital Markets has no control over the content on that web site. In addition, a link to a non-Generational Capital Markets web site does not mean that Generational Capital Markets endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Capital Markets BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Capital Markets.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.