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Private Equity, Dry Powder, & Why It Matters to You!

By Generational Equity

Private Equity Dry Powder

Private equity firms have a record amount of cash to deploy in 2020. In fact, according to Fox Business News, they have an estimated $1.5T, an all-time high!

Fox adds:

As for private-equity firms themselves, their cash balances have risen every year since 2013 after falling the four years prior, in the wake of the global financial crisis. Still, how they generate more by moving out of previous investments will be a focus for investors and analysts.

Two items to consider here: First, far too few business owners that we meet with have PE firms in mind as potential buyers. They mistakenly think that they are too small or are in undesirable industries for PE firms to even consider. Our Insights over the years have debunked those myths:

Now if you take the time to review these articles, you will see a very common theme:

  • “Sterling is focused on making majority investments in manufacturing, distribution and industrial service businesses and is interested in exploring partnerships of all sizes.” (Article one)
  • “And it is great news for owners of lower middle market businesses because most PE firms in this niche have very low (if any) size criteria for add-ons.” (Article two)

Point number two: PE firms exist for one purpose – to invest the money their limited partners give them into companies and then help those companies grow via strategic guidance, organic growth and add-on acquisitions. Over time, either through taking the new entity public, or transitioning it to a strategic buyer (or another financial one), they generate returns for their investors.

So you see THEY HAVE TO INVEST THEIR DRY POWDER OR RETURN IT!

None of them wants a reputation for doing that, so the great news for you as a business owner is that the $1.5T must be invested in the next five years or so, which is the typical lifetime of a fund. And PE firms that specialize in the middle market are looking hard and aggressively for add-on opportunities.

The good news is that Generational Equity is here to help you prepare your business for sale, find an optimal buyer, negotiate and close the deal for you, as well as provide wealth management advice post-transaction.

To learn more about how we can help you take advantage of the $1.5T in dry powder currently with equity firms and move onto the next phase of your life, give us a call at 972-232-1121, or visit our website, provide us with your contact information, and we will be in touch.

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

© 2020 Generational Equity, LLC All Rights Reserved 

Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
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Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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Robert Evans, President and CEO of Mealtracker Dietary Software
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Karen S. Williams, CFO, BW Manufacturing
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Terry D. Wickman, President, Keytroller
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
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Karen S. Williams, CFO, BW Manufacturing
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Andy Graham, Vice President, Modern Heating & Plumbing
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
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Larry Moore, Owner, A Company Portable Restrooms
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Michael J Polarek, President, Paragon Packaging
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Bil MacLeslie, CEO, ipHouse
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
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Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
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Jay Dinnison, Owner of Sharpe Mixers