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Private Equity Firms Are Looking for You!

By Generational Equity

Private Equity Firms Looking

Not long ago I came across an article that focused on M&A from the buyer side perspective. I thought I would share it with our subscribers since most are business owners who need to be aware of how professional business buyers operate, what they look for, and how they approach businesses. 

Entitled the “The Art of Deal Sourcing” and written by one of our favorite exit planning authors with Axial, Danielle Fugazy, it really shows how aggressive private equity firms have become in sourcing good deals and how vital it is to hire an M&A advisor to represent you in negotiations with buyers like this.

Here are a few excerpts from her fantastic article:

With high levels of dry powder, there is more pressure than ever from LPs on fund managers to put capital to work. As a result, LPs are increasingly focused on the deal pipeline. “The market is already difficult and will likely get more difficult. Everyone wants to make sure there is ample deal flow generation,” says Kelly DePonte, managing director with Probitas Partners.

Translation: If you own a privately held company today, you will be getting a call!! But do you know how to discuss your company with these professional buyers? More importantly, is your business even “buyer ready”?

One of the leaders in the PE world in doing ongoing business development is Summit Partners. Born out of TA Associates in 1984, Summit Partners grew up buying into the importance of propriety deal flow. The Boston-based firm also put into place their own deal sourcing method.

“The key to Summit’s deal sourcing is building relationships on their own before a company is even looking for an investment or a buyer. The thing is these people aren’t trying to develop a relationship with a company that is in the market now, but one that may be in the market in three or four years from now. It takes time to see the results this role brings and LPs understand that,” says DePonte.

“When I was doing a detailed look at Summit they had to be in touch with a company on average for at least two years before an opportunity popped up.”

So what does this tell you about how PE firms operate? That they are in the business for the long term. They begin talking to companies YEARS before an exit event occurs. 

Why?  

Because it often takes that long for the owner of a privately held company to even realize that exit planning is vital. 

That is why the educational exit planning conferences that Generational holds are so vital. Exiting a business in an optimal fashion (where you actually make money) is a process, not an event. As we have often said there are two types of business owners:

  • Those that HAVE to exit
  • Those that PLAN to exit

The latter group tends to maximize their financial rewards because they take the time in advance to build a “buyer ready” business. 

Have you done so?

If not, do you know how?

Will you be prepared when extremely savvy, professional buyers with private equity firms come calling to discuss your business and its valuation? Most likely not. That is why it is very important that you protect the legacy of the business you have built (and its brand) by hiring an experienced M&A advisory firm to represent you.

Optimal buyers with optimal deals are out there but not if you don’t prepare in advance.

Want to learn how?

Attend a Generational Equity exit planning conference near you. These highly educational, no obligation meetings are designed to educate business owners on the complexity of exiting. Over 80,000 business owners have attended since our inception and left knowing how to better prepare for the freedom that comes from an optimal exit plan.

Use the following links to learn more:

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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