Over the years we have discussed at length the growing and expanding strategic M&A trend: The Add On Strategy. Over the past decade, the percentage of add ons acquired by private equity firms (PE) has grown substantially, reaching nearly 70% of all transactions last year according to Pitchbook:
Well, I am pleased to assure you that despite the turbulent times we find ourselves in, PE firms are staying the course and continue to make well-planned, strategic add on (aka, bolt on) acquisitions!
Because they have long-term visions for their platform companies, knowing that eventually all this will end and the economy (and the world) will return to some form of normalcy. When it does, they will be ready to grow and expand as never before.
I saw this in action recently when Bow River Capital announced that one of its platform companies, Veregy, had made two related acquisitions, making them the seventh and eighth additions to the platform since inception.
“On April 21, Veregy, a Bow River Capital portfolio company, acquired Texas-based Four Star Fabricators and Service Company, LLC, and Four Star Mechanical, LLC (together, “Four Star”). These transactions mark the seventh and eighth acquisitions under the unified Veregy platform.”
“The partnership with the owners of Four Star, Chris Slaughter, Candsis Slaughter, and Brian Bowman, allows Veregy to address growing energy efficiency, power generation, and long-term master planning needs with customized, high-value solutions for both current and prospective customers across Texas.”
Now odds are good that the discussions between Veregy/Bow River and Four Star started several months ago, probably well before the pandemic hit. However, as you can see, the long-term vision that they have for this platform superseded any short-term COVID-19 concerns.
In fact, I would be willing to bet that both the PE firm and the owners of the two companies acquired probably did some EBITDAC recasting the last 8 weeks or so before the deal closed. This would allow them to come to an agreement as to the real impact on the business that the shutdown may have had, with a longer-term view of the upside of the investments for both the sellers and Veregy/Bow River.
You can see this vision from the press release:
“Veregy is an award-winning energy services company (“ESCO”) that designs, engineers, and implements eco-friendly building and system optimizations that minimize upfront costs and produce meaningful energy and operational savings. Across the United States, Veregy’s combined offerings provide comprehensive infrastructure upgrades, energy management, and energy efficiency solutions in mechanical, plumbing, lighting, solar, battery storage, geothermal, and customizable building control systems in addition to ongoing facility management and maintenance services.”
“The collective enterprise has delivered billions in energy performance contracts for academic, municipal, healthcare, commercial, and federal facilities across more than 30 states.”
Certainly as we enter the economic recovery phase of our current situation, nothing will be more important than helping building owners and tenants achieve even greater savings in energy costs over time.
And when you review the descriptions of the two acquired companies, you can really see the synergies in action that propelled these acquisitions:
“Founded in 1985 by the Slaughter family, Four Star Fabricators and Service Company, LLC (“FSF”) has been providing mechanical contracting services to the North Texas market for more than 35 years. FSFs services include the replacement or upgrade of HVAC systems to more efficient geothermal or variable refrigerant flow systems, which drive tangible energy and operational savings for customers.”
“Led by Brian Bowman, FSM provides plumbing, piping, and domestic water design and implementation services. Previously Crosstex, Brian, and the team have brought high valued plumbing services to Texas for over 20 years”.
So what does this example mean to you, the owner of a middle market business, today?
Several things I would say. First, as we have said before, deals are still being done today despite the economic situation we are in. That is because professional buyers, again, have a longer-term view than just the last few months. They know that the entrepreneurial spirit that has made this nation so successful will once again drive our economy to recovery, and that they want to financially participate in that recovery.
Secondly, odds are good that pre and post-pandemic there are and will be PE firms like Bow River that are actively looking for acquisitions – you just have no idea that they are because most of these deals do not make it into the business press because of the relatively smaller size of the transactions.
Your challenge in locating and approaching buyers like this is to determine who is active in your niche and then create documentation that they will want to see that matches their investment criteria. If you have never done this before, you don’t want on-the-job training on how to. It is far better to hire a professional M&A firm to represent you in the market.
Generational has developed a proven and successful method for not only marketing to firms like Bow River, but to also provide them with key information about each business we represent to project them in the most positive light. Remember the old adage in M&A:
Explain the Past but SELL the Future!
Now more than ever, this is very, very true indeed.
If you would like to learn more about how professional buyers think, what they are after, and how to approach them, you have several options:
So the key takeaway here is that buyers are still active and the professional buyer that you want to attract is still out there. Be sure to consider that as you look at your exit planning strategies.
And in closing, we wish you, your business, and your loved ones safety and good health during this time. In the midst of challenges there are always blessings and opportunities. This situation is no different. History shows us that this too shall pass, and that when it does, we will emerge stronger than before.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2020 Generational Equity, LLC All Rights Reserved
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
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.
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.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
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
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
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!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.
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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 Equity, LLC’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 Equity to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Equity 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.
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.