I recently attended a webinar hosted by PE Hub's Buyouts Insider, a leading publisher of M&A and venture capital information. It was an interesting insider’s view on sourcing transactions. “Insider” because the panel was comprised of folks from private equity firms (PE) and companies that specialize in sourcing deals for PE, and the webinar provided a unique view on how deal professionals go about locating companies to acquire/invest in.
I thought I would share a few key takeaways from the webinar with our readers since many of you are owners of businesses that may eventually become PE targets. If you want to listen to the entire webcast you can do so here.
These are the key pieces of information I gleaned that are pertinent to owners of privately held, middle-market companies:
Let’s take a look at these a bit closer. First, bullets one and two go hand in hand: It is amazing how many opportunities PE firms see annually. The folks on this webcast put it at 500 but I have talked to some PE sourcing professionals who put it much higher, more like 1,000 per year. Just think about that for second, if you are approaching PE firms without professional representation, how do you get your opportunity to stand out and be reviewed?
It is very tough, which leads us to bullet point number three: Your documents need to be not only accurate, they also have to be in a format and style that allows a private equity firm to quickly understand your company’s value proposition. You have about 15 seconds to do this in your one-page confidential business profile. If you are unable to, you will get lost in all the noise. Hence the need to produce docs that are in a format they want to see them in.
For this reason, bullet point four is key: M&A advisory firms like Generational Equity provide two key functions: They prepare great documentation for buyers to review AND they ensure that their clients are truly “sellers.” How do they do these things?
Well, experience has taught us what PE firms want to see and how they want to see it. But just as importantly we require an upfront commitment fee for our services (this eliminates the non-sellers) and we conduct a full business evaluation on every client PRIOR to taking them to market. This ensures that our clients know their value before talking to buyers and makes them much more buyer ready than those not using an intermediary.
Finally, more and more PE firms are creating business development teams and/or are hiring companies that specialize in buy-side acquisition searches. This can be good and bad for owners of privately held companies. The good is that they will probably find you if you meet their investment criteria. The bad news is that the PE firm will negotiate a deal that will benefit them, not necessarily you. And since many of these deals are partial sales, meaning that you are retained in the new company, the last thing you want to find out a year after a transaction is that you left significant cash on the table because you were unprepared to negotiate.
We love PE firms, we sell lots of companies to them, but we are not naïve. PE firms survive because they generate an internal rate of return (IRR) for their limited partners that allows them to satisfy their investment needs. This means that they want to pay as little as possible for your company, keep you on board to run it, and flip it 5-7 years out when it is a much larger company. That is great for you, since you will take a “second bite of the apple”; however, no one likes to leave chips on the table via the initial investment.
To prevent that, you need an M&A intermediary to provide wise counsel. That is where Generational Equity steps in: We have over 34K buyers registered in our buyer database, many of them equity firms. On an annual basis, about 25% of our clients are acquired by equity firms either as platform companies or add-ons. We have the experience you need to get an optimal deal for you.
Act now before a PE firm calls you with an offer you think might be too good to pass up.
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
© 2016 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
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.
Generational Capital Markets, Inc.’s affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Capital Markets to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Capital Markets is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
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 Group 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 Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its 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 may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group 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 Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group 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 Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group 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 Group 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.
Generational Capital Markets, Inc. ("GCM"), member FINRA/SIPC, is wholly owned by Generational Capital, LLC ("GC"). Both GCM and GC are affiliated with Generational Equity, LLC; and all part of the Generational Group of companies. This website is solely for general informational purposes and is not guaranteed by us to be accurate and complete statements of fact and should not be relied on as such. Opinions in this website constitute the current judgment of the author as of the date and its last update. The content of this website does not necessarily reflect the opinions of GCM, and is subject to change without notice, and GCM is not under any obligation to update or keep current any information contained herein. This website does not constitute any personal recommendations and does not take into account the specific investment objectives, financial situation or particular needs of the reader. The information contained in this website should not be construed as an offer, or a solicitation of an offer, to buy or sell any securities or other financial investments. The information presented should not and cannot be viewed as an indicator of future performance. To the extent permitted by law, GCM does not accept any liability arising from the use or retransmission of the information in this website.
Furthermore, all information contained within this website is the property of Generational Group.
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.