Most business owners that we meet at our M&A conferences are often surprised to hear that private equity firms are interested in middle-market sized deals. Based on news reports that focus on billion dollar deals, most owners of privately held companies assume that equity firms only look at very large companies. Actually, nothing could be further from the truth.
Recently Pitchbook, the leading research and analytical firm focusing on the private equity community released its fourth quarter Private Equity Breakdown. Their data is always quite interesting, and since all they do is focus on the private equity community their info is quite detailed and accurate.
On a quarterly basis they survey equity firms and their completed deals.They analyze this data in a variety of ways to evaluate equity firm activity. On a regular basis their data indicates that not surprisingly, equity firms are quite interested in middle-market sized deals. This can be seen in the following chart:
As shown, through the third quarter of this year, approximately 40% of all deals closed by equity firms were valued below $50 million dollars. Nearly 75% of the companies acquired by equity firms have been valued below $250 million.
When we share this data with owners of privately held companies, they tend to be quite surprised. The reality is the day of the billion dollar deal is long gone. Although these huge deals will still occur, equity firms have learned the hard way that it is simply less risky, and the returns are greater, by making multiple acquisitions of smaller companies rather than try to hit a homerun with a billion dollar deal. In addition, financing for larger deals has become more difficult to obtain in our post financial crisis environment.
All of these factors are causing more and more equity firms to move “down- stream” into the realm of the middle-market and smaller deals.
As you consider the sale of your company, be sure to include this group in your acquisition plans. The challenge you will face is ensuring that you are able to get the attention of an equity firm when you go to market.
These professional buyers literally look at hundreds of acquisition opportunities. The amount of time they spend reviewing each one is dependent on the quality of information and the format it is presented in.
For even more information on this topic, I would encourage you to attend one of Generational Equity’s M&A conferences. While there you will be able to learn more about how equity firms operate, what they are looking for, and how to get their attention when you market your company.
Most importantly, never make the assumption that any buyer group will not have interest in your firm. Chances are good there is a buyer out there for your company, you just need to determine who and how to attract their interest.
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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
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
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
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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
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
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
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.
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 would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
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
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
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
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 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 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
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