Recently Mergers & Acquisitions magazine met with Peter Lehrman, CEO of Axial, a network connecting capital providers/intermediaries with businesses seeking growth and investment. Because of his company’s role in the capital creation process, Lehrman’s perspective is unique in the M&A arena. Here are some key excerpts from his interview:
“I think private equity firms will be substantially more active this yearthan last year, unless markets continue to go off a cliff, and then they’ll continue to wait and pause. Unless the markets are cratering all year long, I think the big pause that a lot of private equity firms took last year will end. A lot of them have a lot of capital that they raised last year or in 2014, and if the broad equity markets are down 15 percent to 20 percent this year, it will allow them to become active again, because they will be able to price and win deals at valuations that they are more comfortable with.”
As for activity, Generational Equity concurs with Peter—so far this year we have seen no lessening in demand or interest from private equity firms. In fact, far from it. Many are moving fast to acquire businesses before the Fed raises interest rates later this year. Even if the Fed does not act again in 2016, the idea that they might is highly motivating to equity firms that finance most of their transactions.
Mr. Lehrman also discussed an industry he expects to see solid growth in transactional demand:
“There’s obviously an elevated consciousness around global terrorism, but I think the political outcome this year is actually less important regarding that. Regardless of whether a Republican or a Democrat wins, I think the budgets, and C-level priority, for government agencies and companies around cybersecurity, data security, national security—those are all rising in terms of their importance … Regardless of the political outcome, I think there will be significant demand for businesses that provide products and services that help governments or corporations that manage security risks.”
He makes an excellent point: Unfortunately our world has become a less secure place over the past few decades. This is creating opportunities for companies that offer services designed to overcome these fears. If you own a company that is in the security/safety space, your business could be in demand right now.
Finally he also examined an ongoing trend that Generational Equity has been witnessing as well, which accelerated in 2015:
“There’s a constant and secular trend where more and more people are setting up their own boutique investment banks and private equity firms, where they’re doing deals on a deal-by-deal basis and they’re not raising funds. That’s been a trend for one or two years now, and I think that trend is going to continue to gather steam. The number of professionals who leave a blue chip financial institution and set up their own two-person, five-person operation, and become customers of Axial, that number is just continuing to become a larger and larger percentage of the customers that we serve.”
This is an interesting phenomenon that we have experienced, especially with family offices. Instead of pooling capital via limited partners into a traditional fund, more and more groups/individuals/families are making direct investments in lower middle-market companies because it allows them greater control and flexibility. However, because of the confidential nature of these operations, they don’t widely publicize their goals. We are aware of them because they come to us and tell us exactly who they are, what they are looking for, and their strategic vision regarding acquisitions. In fact, we have more than 34,000 buyers registered in our proprietary buyer database alone.
These are just a few of the trends Lehrman is seeing from his unique perspective with Axial. The reality is we are in the midst of one of the strongest seller’s markets in decades. Because of this we are encouraging every business owner to thoughtfully examine their exit strategies and plans. Since very few have a documented plan in place, attending an educational Generational Equity seminar is a great place to start the process.
Special thanks to Peter Lehrman and his thought leadership on current M&A trends!
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2016 Generational Equity, LLC. All Rights Reserved.
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 must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
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
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 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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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
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
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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.
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
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
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
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 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 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
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
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